Council and housing association tenants will lose their automatic right to a home for life under newly-launched reforms.
New renters will be offered fixed-tenancy agreements of as little as two years, and could be evicted after that period if their financial circumstances have improved.
Housing charities accused the Government of penalising the poor, warning that the change will act as a disincentive for social tenants to earn more.
But housing minister Grant Shapps insisted the new arrangements will be fairer than the existing system, which has resulted in the waiting list for social homes almost doubling over the past 13 years to five million people.
The eight million existing social tenants will not be affected by the changes, which apply to England only and could be introduced as early as next year following consultation.
The plans are likely to inflame tensions within the Conservative-Liberal Democrat coalition. Lib Dem deputy leader Simon Hughes insisted the move to introduce fixed-term tenancies was the policy of neither the coalition nor his party when it was floated by Prime Minister David Cameron in August.
But Lib Dem communities minister Andrew Stunell backed the plans, saying: “Liberal Democrats have always said we need to have a much smarter system that protects lifetime tenancies, but also provides the flexibility to ensure that help is targeted at people who really need it, enabling us to get more for every pound of taxpayers’ money.”
Mr Shapps said he expected contracts of a “significant length” – anything between five and 20 years – to be the norm under the new system, with some households continuing to get a lifetime tenancy. But the minimum contract will be two years.
Councils will be able to set their own rules on who gets on to the housing waiting list, and a new national home swap scheme will make it easier for tenants to move around the country to find work.
New tenants will have the right to pass on their home to a spouse or partner on their death, but will no longer be able to pass it on to other family members who lived with them.