Councils and housing associations are to be given an extra £16,000 for every home they build, the Scottish Government has announced.
A total of £44 million is to be ploughed into the bodies, allowing authorities to create more social housing.
Local authorities currently receive up to £30,000 towards the cost of building a new home, while registered social landlords (RSLs) get around £42,000.
The announcement comes the week after the right to buy scheme was scrapped.
Deputy First Minister Nicola Sturgeon announced the increase just hours after a multi-agency report on affordability, Financial Capacity and Subsidy Rates, which recommended introducing higher subsidy levels, was published.
She said: “Increasing the supply of affordable housing is a vital part of our efforts to build a better and fairer Scotland.
“We are now two years into our five-year target of delivering at least 30,000 additional affordable homes and we are collectively making good progress towards making this target, with last month’s housing statistics showing that we have already completed almost 12,900 additional affordable homes.”
Ms Sturgeon added: “Housing is central to the health and wellbeing of individuals and communities, and I am confident that the additional resources announced will strengthen our commitment to provide the people of Scotland with high-quality, sustainable homes that they can afford and which meets their needs.”
David O’Neil, president of the Convention of Scottish Local Authorities said: “This increase will assist councils in responding to local housing need.
“It will create greater confidence amongst councils to plan for a sustainable new build social housing programme.
“This in turn will provide a boost to local economies and employment opportunities.”
Susan Torrance, Scottish Federation of Housing Associations policy manager, said: “New homes are needed urgently and these measures will enable our sector to continue to build new rented homes and to seek to ensure that they are affordable to those working in low-paid jobs and on low incomes.”
Jim Hayton, policy manager for the Association of Local Authority Chief Housing Officers said: “There is a pressing need for social housing throughout Scotland, and this increase will give councils and their partners much needed scope to plan and deliver sustainable social housing development programmes for their communities.
“We also commend the Scottish Government for the inclusive manner in which the working group has been encouraged to develop its report and recommendations on this important issue.”