Requirements to include a quota of affordable homes in new housing developments should be waived, a Government-commissioned report has recommended.
The move would allow developers to create more properties for let to boost the private rental market.
But critics warned the change would come at the expense of people desperately struggling to get on the property ladder.
The review of the private rented sector has been conducted by Sir Adrian Montague, chairman of private equity firm 3i.
It said councils should consider using powers to waive the requirement to build homes available for those on lower incomes to buy in order to increase the number of properties built to let.
The review also recommends setting up a task force to encourage build-to-let investment and the release of unused publicly-owned land for development.
"Whilst desirability of affordable housing should not be ruled out, it should be weighed against the benefits already built into market rent developments, in the context of an accurate assessment of the economics of building homes to rent," it said.
"In many cases, it will be appropriate for authorities to waive affordable housing requirements in relation to schemes for private rental, or to the private rental component of larger schemes also including an owner-occupier component."
Housing Minister Grant Shapps said the report offered a "blueprint" to expand the sector and that its recommendations would be considered "very carefully".
But its findings were challenged by industry groups, councils, charities and the opposition.
David Orr, chief executive of National Housing Federation , said: "While we agree that there needs to be more private market rented housing, this should not be at the expense of affordable homes.
"The one doesn't replace the other as both are needed for a fully functional housing mark. Therefore we don't think private rental developments should normally be exempt from affordable housing contributions."
Shelter 's chief executive Campbell Robb added: "While more rented housing could help ease pressure on this over-heated market, it's vital that this does not come at the expense of building affordable homes for people across the country already struggling to get on the property ladder in their local area."
Shadow housing minister Jack Dromey said: "We are not convinced that the answer to the crisis created by this Government is to further water down affordable housing requirements that councils place on developers.
"As rents hit a record high in July, many families are already paying the price of the Tory-led Government's failure to build enough affordable homes.
"The Government should be acting to address this problem, not looking for ways to water down existing legislation which could make the problem worse."