Leeds city region and Rossington in South Yorkshire have been shortlisted to be the first new eco-towns in England.
The two locations are on a list with 15 other sites all around England, which will eventually be narrowed down to just ten towns in six months time.
The housing minister, Caroline Flint, said the new towns would help to tackle climate change.
"We have a housing shortage in this country and that’s why we need to build more homes," she told BBC News 24.
"[This plan is] tackling both the challenge of climate change and the need for more families to have a future in a home of their own," Ms Flint explained.
In order to make it to the final selection, the shortlisted locations will need to prove their potential to provide affordable housing and "the highest green standards".
Last month, Sheffield city council announced that it is about to start work on its largest housing regeneration scheme ever.
Over 1,000 new homes will be built on the Scowerdons, Weakland and Newstead estates in South Sheffield.
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