Home construction in Cuba primarily has been left to the government, but demand has outstripped supply and a dire lack of housing has greatly frustrated the island's 11 million inhabitants.
Raul Castro, 77, who took over the reins of power from his older brother Fidel Castro last February, said the policy change would allow the quick construction of hundreds of thousands of new dwellings.
Cubans will be given clear guidelines about the dimensions of a proposed new dwelling, Castro explained on a local television program.
They will be told "OK, here you can build. I've given you this amount of space, that amount of room for a street, and that amount for a sidewalk. Now build your little home with whatever you can," the former defense minister said.
His remarks were made as he visited the newly built "La Risuena" neighborhood, a settlement of Venezuela-built homes erected with the help of oil money that has lessened, but not erased, the housing deficit.
The announcement comes just days after Cuba's celebration of the 50-year anniversary of its 1959 Revolution. Former leader Fidel Castro was a no-show at the celebrations.
Havana has succeeded in building only about half its annual goal of 100,000 new homes per year, and the dearth of dwellings worsened last year after Cuba was struck in succession by three hurricanes that leveled around a half million homes.
Over the past year, reforms initiated by the younger Castro brother have included putting vacant farmland in private hands, increasing farmers' pay, and allowing private contractors such as taxi drivers back into Cuba's transport sector.
Raul Castro also has allowed Cubans to buy computers, own mobile telephones, rent cars and spend nights in hotels previously accessible only to foreigners -- provided they can afford such luxuries on the meager average pay, equivalent to about $17 per month.