The Duchy of Cornwall, which provides a private income of over £20m per year to the Prince of Wales, is to sell off 20% of its property over 10 years.
There will be £500m invested in local communities, including in affordable housing and environmental projects, as first reported in The Times.
The property empire spans 128,000 acres across 19 counties, and is given to the heir of the throne, but there has been a push for a greater focus on "social impact".
"We're not the traditional landowner… we want to be more than that. There is so much good we can do. I'm trying to make sure I'm prioritising stuff that's going to make people's lives, living in those areas, better," said Prince William.
But former Home Office minister and a critic of royal finances Norman Baker said the duchy would still be a "royal fruit machine... he pulls the handle and gets a jackpot every time".
He said that the switch to more housing would not leave the duchy any worse off: "More houses, more tenants, more income," Mr Baker said.
In the duchy's new strategy, there will be a greater emphasis on five areas where it is a landowner - Bath, Cornwall, Dartmoor, Isles of Scilly and Kennington in south London.
The duchy has its roots in medieval, feudal land ownership, but it has been having something of an image make-over, with an emphasis on social value, such as providing affordable housing and protecting the environment.
Chief executive Will Bax said: "The Duchy should exist to make a positive impact, particularly in the communities where we can make the biggest difference."
Prince William has a project to tackle homelessness, Homewards, and there are plans for the duchy to provide an extra 12,000 homes by 2040. About a third of these are intended to be affordable, with an investment in housing of £161m.
There will be £123m for work places and encouraging the creation of more rural jobs and more support for renewable energy.
That includes an expansion of solar panels on rooftops in the south west of England, with the aim of generating enough power for 40,000 homes.
There will be £20m for environmental schemes and reducing emissions, including helping to restore peatlands and biodiversity on its estates.
This change in direction also comes as pressure grows for more transparency on royal finances.
Particularly in the wake of the Andrew Mountbatten-Windsor scandal there have been calls for more financial openness, including about royal property.
The public funding for the Royal Household - the Sovereign Grant - is currently under review, and for the first time since its introduction in 2012 is likely to be reduced.
The grant is currently at a record high of almost £138m per year, to cover building repairs at Buckingham Palace, and seems set to be lowered next year.
Despite the likely one-off reduction, the Treasury has indicated that it will keep the so-called "golden ratchet" in place for subsequent years, which means the funding can go up but cannot go down.
That will be dependent on the approval of MPs in forthcoming legislation.
Revealing much about the Andrew Mountbatten-Windsor scandal was Andrew Lownie's biography, Entitled, which is being released again this week with fresh allegations.
Lownie said that the scandal was now pushing the royals to recognise the need to be more open about their incomes - and welcomed the move by the Duchy of Cornwall.
"I am delighted by this first step - no doubt occasioned by much recent criticism of royal privilege and transparency - and hope they will be more open in future about their finances and archives," said Lownie.
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