This could be used to build 80,000 to 170,000 new social homes a year and could create the largest social housebuilding programme since the 1970s, the report claims.
The report finds that more that a fifth of social homes in the UK are worth more than the average privately-owned home in their region.
By region, London has the highest proportion of social housing stock, 30.7 per cent, that is above the value of the average private home. The North East has the lowest at 14.8 per cent.
The report argues for a regional cap on the value of social properties similar to the housing benefit cap, adjusted for bedroom size.
Report author Alex Morton said: "Social housing tenants deserve a roof over their heads, but not one better than most people can afford, particularly as expensive social housing means less social housing and so longer waiting lists for most people in need."
Housing minister Grant Shapps said it is "common sense" to use social housing stock as efficiently as possible, "especially since housing waiting lists almost doubled under the last administration".
He said: "Where social landlords have houses that are worth millions, they are able to sell them and build more affordable homes to help more vulnerable people come off the waiting list. Many independent housing associations have already done this, but councils have been slower to seize the opportunity.
"Councils looking to sell vacant social housing can now keep the receipts to invest in affordable housing, regeneration or paying down housing debt in their area."
But the National Housing Federation (NHF) said the idea of selling off social housing in high-value areas to build more in cheaper areas could "effectively cleanse many towns of hard-working people who cannot afford to buy or rent privately."
NHF chief executive David Orr said that the opportunity to sell vacant stock in high-value areas from time to time is"entirely sensible". But he added: "We live in a world where we don’t segment people according to their income or their class. Ideally, we will continue to live in a world where people can be valued for their contribution, not just their income."
Ending Expensive Social Tenancies is available here