Conservative leadership candidate Jeremy Hunt has pledged to spend £1 billion of his proposed 2.5% defence hike on building and improving homes for service personnel.
The Foreign Secretary has promised to build 800 new homes for troops and their families if he beats Boris Johnson to become the next Prime Minister.
"Increasing our defence budget will be crucial in helping us to walk tall in the world as we leave the European Union," said Mr Hunt.
"Coming from a military family, I know that Britain's greatest military asset will always be the brave men and women who risk their lives to keep us safe."
However, Mr Hunt was accused of hypocrisy for pledging defence spending in his leadership bid after Conservative cuts to military budgets.
His announcement came as a Defence Committee report highlighted how military spending had fallen 16% since the Tories came to power in 2010.
Shadow Defence Secretary Nia Griffith said it is "hypocrisy of the highest order" for Conservative leadership candidates to discuss boosting defence spending.
"Instead of considering what is necessary for our defence and security needs, Conservative ministers have delivered crippling austerity which has put unprecedented strain on the men and women of our Armed Forces," she added.
Mr Hunt has pledged to increase the defence budget by £15 billion a year by 2023/24.
He added on Tuesday that £1 billion of this would go on an extra 800 new homes and 2,500 new single living accommodation bed spaces on top of existing plans.
Defence chiefs would also be told to focus on upgrading current accommodation.
The housing pledge came after the Ministry of Defence came under criticism for having too many personnel in substandard housing despite spending £135 million on refurbishments.
Westminster's public spending watchdog, the Public Accounts Committee, also warned that the military risks losing highly skilled service personnel if improvements are not made.
The MOD defended its current spending levels as making the UK one of "only a small number" of nations to meet the NATO 2% of GDP target.
"We have the largest military budget in Europe and are the second-largest spender in NATO, behind only the United States," a spokesman added.