It plans to give first-time buyers priority access to new homes when they go on sale, while it wants local communities to support development.
Under the proposals councils will produce a housebuilding plan for their area, allocating sufficient land for development for locals.
Ed Miliband, leader of the Labour Party, said: “We will get Britain building again by insisting local authorities have a plan to meet the need for housing in their area - and that the big developers play their part rather than hold land back.
"But we will also make sure that communities get the benefit from new home development by guaranteeing that where communities take the lead in bringing forward additional developments, a significant proportion of homes on those sites cannot be bought by anyone before first-time buyers from the area have been given the chance.
“This is not only a fairer system, it is also one which will encourage local communities and local authorities to support the development that our country so desperately needs."
Miliband added: “Too often the trickle of new developments that get completed are snapped up before people from the area can benefit, undermining support for much needed further development.
“And, for too many young families, the dream of home ownership is fading fast.
"Only Labour has a plan to build the homes that our country, our local communities and our families need.”
The Lyons Report by former BBC chairman Sir Michael Lyons was published today, which detailed Labour’s plans.
Lyons added: "We face the biggest housing crisis in a generation. We simply have to do better as a nation, not only because our children and grandchildren need the homes we should be providing now, but because greater house building will make a direct contribution to national economic growth.
"My report sets out a comprehensive plan to tackle the key problems that underpin our failure to build enough homes. This will require strong leadership from central government alongside the delegation of powers and responsibility so that every community provides the homes they need.
“The recommendations will make more land available for new homes; unlock investment in infrastructure; and ensure that new homes are built when and where they are needed in attractive, thriving places. That will involve a more active role for local government in assembling land and in risk sharing partnerships with developers, landowners.
"We will need the industry to do more, get smaller house builders back into business, tap potential in the construction industry, attract new enterprise and unlock potential for Housing Associations to do more. This will reverse the shrinking capacity in a key UK industry and create 230,000 new jobs whilst adding 1.2% to GDP."