Children's minister Edward Timpson said he wants to see the work of the House Project in Stoke-on-Trent, replicated elsewhere due to its success in supporting care leavers to secure appropriate housing and learn new skills.
Five councils - Cheshire East, Islington, Solihull, Staffordshire and Warwickshire - will receive cash to establish the project, with Warwickshire County Council taking the lead on the project.
Warwickshire County Council will also run a "national hub" that will gather evidence from the progamme and support other councils across England looking to run similar schemes.
Timpson said: "This significant new money will establish additional House Projects in five local authorities, as well as a "national hub" which will draw together learning from the programme and support other local authorities across the country to implement further successful schemes.
"This work is part of a wider commitment by the government to involve children, young people and families in the development and delivery of services."
Through the House Project care leavers become co-owners and managers of a co-operative company, which refurbishes empty council-owned properties that then become their homes for as long as they want.
It was developed to help looked-after children avoid a "cliff edge" scenario when leaving care, typified by unsuitable accommodation, loneliness and poor job prospects.
The roll out is the second phase of the project, with the first phase, run by Stoke City Council over the last two years, receiving £588,000 from the innovation programme last year.
"Backed by funding from the government's £200m children's social care innovation programme, phase one of the initiative has been spearheaded by Stoke-on-Trent City Council - but it is the young care leavers themselves who have put their stamp on and developed the programme - genuine co-production in practice," added Timpson.
A report by Stoke City Council estimated that the project could save the public purse £404,000 per young person over a five-year period as a result of improved employability and a reduction in need for additional services, such as mental health support.
To read more about the House Project, see CYP Now's special report on participation and co-production