Retaining Right to Buy receipts could give London boroughs nearly £470m a year to spend on building homes.
Based on data from 2014/15, London Councils said the figure could be spent on replacement homes, if councils kept 100%.
They made the claims in response to a Government consultation on capital finances regulations for local government.
It also called for red tape surrounding Right to Buy receipts to be cut, including restrictions which prevent local authorities from match funding receipts with affordable housing funding.
The calls follow news yesterday that £800m worth of Right to Buy receipts were sent back to the Treasury.
Sir Steve Bullock, London Councils’ executive member for housing, said: “Cutting restrictions around Right To Buy receipts would make a huge difference in helping councils replace those homes that are sold off, even if the level of funding they are allowed to retain is not increased.
“We know thousands more homes must be built in London every year to allow us to even begin to tackle a growing crisis. Boroughs have long been pulling their weight and doing their bit by granting planning permission and ensuring house-building is progressing, but they must be given more support.”