The Liberal Democrats want to "ensure the face of council housing is changed forever" by building a million social homes over the next 10 years.
Sir Menzies described social housing as 'ghettoised'
Sir Menzies Campbell said it was a "national disgrace" that cities are "too often known for 'sink estates'".
He also suggested councils could buy land from farmers then sell it on at a profit to developers.
The government says low cost housing is a key priority and has pledged 30,000 new homes will be built in 2008.
But Sir Menzies said more radical action was needed and he called for a "revolution" in social housing, with 100,000 low-cost homes to be built per year.
"Social housing has become ghettoised - assigned only to the poorest and most vulnerable - with just one third of working age tenants in full-time jobs," said Sir Menzies.
"We need to break the pattern of the past 10 years with a revolution in housing policy."
There are severe housing shortages in many inner city areas, with thousands of families priced out of the property market and on council waiting lists.
The government has said it wants to ease the crisis by encouraging more social housing - but it has rejected calls to allow local authorities to spend rent receipts on building new council houses.
It wants instead to help people get on to the property ladder by encouraging more part-rent, part mortgage deals.
Sir Menzies suggested those priced out of the property market could be helped by local authorities selling council houses at cost price, but retaining part ownership and allowing them to control the price of future sales.
When buying green field sites, farmers would be told that planning permission would only be granted if they sold the land to the council.
'Open to abuse'
The council would then secure planning permission and sell the plot on to developers, keeping the profit to pay for local services.
The Lib Dems said landowners would take part because they could still sell for more money than the land was worth without permission.
But the Lib Dem scheme was criticised by the Country Land and Business Association, who described it as "completely divorced from reality".
President David Fursdon said the system was "open to so much abuse" as councils would be deciding whether to grant permission for schemes that would make them huge sums of money.
"And why is it that it's OK for the local authority to do something on the land when it's not for the private landowner?" he asked.
In a speech in Birmingham, Sir Menzies will say the number of social homes being built has halved in the past 10 years, while the waiting list has grown by 50%, bringing the total to one-and-a-half million families.
Having 130,000 children living in unsuitable temporary accommodation and one million in overcrowded conditions was unacceptable in 21st-century Britain, he will say.
But Housing Minister Yvette Cooper questioned his figures, saying they were "flaky and don't add up".
"We are building more homes than at any time since 1990 and are committed to building at least 200,000 a year by 2016, with the clear ambition of going even further.
"While we are already increasing affordable housing through practical plans, we have to go further and build even more. And, as Gordon Brown has made clear, this is a priority for the government," said Ms Cooper.