The pronouncement by Housing Minister Yvette Cooper - for an extension of the £60k house competition - was made yesterday with former ODPM minister David Milliband.
The competition, officially called Design for Manufacture, was a pet project of Prescott while he was still in charge of the ODPM.
This new phase will be run by English Partnerships on six sites and will create small-scale, eco-community developments rather than individual homes.
The government plans to challenge developers to deliver 'either low-carbon or carbon-neutral affordable homes'.
Cooper also announced a new feasibility study to investigate the possibility of 'making the Thames Gateway a low-carbon development area' within the next decade.
The study will be asked to assess how this can be achieved in a way that supports the 120,000 new homes and 180,000 new jobs being delivered.
Cooper said: 'We need to build the new homes that the next generation needs, but we must ensure that they are sustainable for the next generation too.
'Instead of using the challenge of climate change as an excuse to prevent new homes and jobs, we need to use the opportunities of new development to raise standards, transform the market and the way we build.
'The Design for Manufacture competition has shown that developers can deliver well-designed affordable homes with strong environmental credentials too.
'The next phase of the competition provides a fresh opportunity to meet the challenge of building new developments in a more environmentally sustainable way,' she added.