Council house applicants whose parents or grandparents were born locally should be given priority on waiting lists, according to a new policy from the UK Independence Party.

The proposal, to be launched at the party's annual conference which begins on Friday, will be seen as a direct appeal to voters concerned by much-reported claims that immigrants are able to move to the top of housing priority lists.

But it will also draw criticism that Nigel Farage's party is appealing to beliefs which are allegedly based on scant evidence.

Andrew Charalambous, Ukip's housing spokesman, said the proposal would strengthen local communities, particularly in London, because many people are being encouraged to move out to obtain cheaper housing.

This problem, he claimed, has been exacerbated by influxes of immigrants, some of whom apply for social housing.

"With the 2011 census showing almost three million people or 36.7% of London's population are foreign-born, making London the city with the second largest immigrant population after New York City, it is likely that the inflow of migrants has been a massive factor in the overcrowding of the city's social housing.

"It is imperative that the issue is tackled. We need to see more social housing made available and priority given to British families and those who have contributed to the system over a number of years."

In March, David Cameron made a similar pledge. He said ministers, through new statutory guidance, would ensure that people lived in the same area for between two and five years before they would be allowed on to a waiting list for social housing.

Ukip's new policy, party insiders say, takes that one step further. It proposes that an applicant be given priority if their parents can be shown to have been born in the borough. This would be expanded to grandparents on a sliding scale if there are a number of similar applicants.

A party source denied the policy appeals to racist sentiments. "Many black and minority ethnic people in Britain are second and third-generation city dwellers. We are appealing to them as well as others," he said.

The party has thrived not only because of its Eurosceptic stance but also because of its hard line on immigration, particularly on people from countries which have recently gained access to the EU.

At the conference, Ukip will also publish a number of freedom of information requests to London boroughs to bolster claims that many people who are not British successfully apply for social housing.

Ukip said Camden council figures show that of the borough's 22,817 tenants, about 8,000 describe themselves as British while some 6,000 say they are foreign nationals. The remainder declined to define themselves.

A council insider said Ukip may be seizing upon incomplete data to make a simplistic political point.

"A vast majority of people who live in our accommodation have been there for a long time and have grown up there and stayed there. If they are not British nationals, they may well be British residents and this is not reflected in the data," the official said.

Farage will use the conference, on the party's 20th anniversary, to solidify his surge in support over the last nine months to become the country's third most popular party in the polls.

Some senior members hope Farage will try to instil some party discipline and draw up some new policies as they come under greater scrutiny.

Recent gaffes have included footage – which was discovered by the Guardian – of the MEP Godfrey Bloom alleging that UK aid goes to "bongo bongo land". Some council candidates have written offensive comments while using social media.

These embarrassments have done little to dent Ukip's popularity. The surge has taken on greater significance after polling from Lord Ashcroft this month found that the party has helped to squeeze the Tory vote in many key marginals, providing Labour with an 8.5% swing since the 2010 general election.

The results fuelled demands by some Tory MPs for the party to strike a general election pact with Ukip before the polls in 2015.