Giving a stake in homes could deter anti-social behaviour, the report says
Council house tenants who make a "positive" contribution to society should get discounts when buying their homes, a report has urged.
Former Tory leader Iain Duncan Smith's Centre for Social Justice says there should be more "incentives" for people trying to come off benefits into work.
Home ownership improves social mobility and could stop estates becoming ghettos, the think tank argues.
Ministers say they are trying to tackle housing shortages.
A recession is set to reduce further the number of council homes being built, while increasing demand for low-cost accommodation.
More than four million people are waiting to be housed, while only 170,000 properties are becoming available every year.
The government has pledged to construct three million new homes by 2020, but many experts believe this is unrealistic.
The Centre for Social Justice wants council properties to be used as a "lever" to improve the life chances and economic circumstances of their tenants.
Those making a "constructive" contribution to society should be offered discounts to encourage them to buy stakes in their homes, its report adds.
Mr Duncan Smith told BBC Radio 4's Today programme: "What it's saying is that right now these estates have become almost ghettos of the most broken families and their incentive is to remain like that."
He added: "Most kids growing up there will never see anyone going out to work.
"The number of broken families increases all the time and so the idea is that you have to try and give people an incentive."
The think tank believes people who "genuinely" try to find work could be rewarded with an increased stake in their property.
The report also calls for tenants to be given greater access to shared equity schemes, more flexibility over their individual arrangements and for councils to have increased control over their own housing needs.
Mr Duncan Smith said many estate residents were trapped in a "vicious cycle" of unemployment, family breakdown and addiction.
"Housing policy must be seen as part of a broader social policy which aims to get people back to work and in a position to help themselves," he said.
"We need to find a way to end the cycle of destructive behaviour on our social housing estates. This must involve fostering a real link between aspiration and behavioural shift."
The government said it was considering plans for housing reform "to create a fairer and more effective system for those living in rented housing" and to "support aspiration and social mobility".
A report last month by the Chartered Institute for Housing called for the longstanding commitment for a "council house for life" to be reviewed to ensure those most at need were given priority.
This received a frosty response from many Labour MPs, who said the solution to the shortage was to build more.