Councils such as Birmingham which demand money from developers in return for granting planning permission have been backed by an independent watchdog.
Birmingham City Council has been accused of accepting "bribes" after it emerged £21 million had been paid since 1990 by firms such as Bryant Homes.
But the Audit Commission said authorities should demand more cash than they are, in a report published today.
The funding comes from Section 106 agreements, where a local planning authority and developer enter into a legal deal to provide schools, leisure facilities, town centre improvements, new roads or transport systems.
Sainsbury's is currently in negotiations to fund a £10 million regeneration package in return for planning permission to build a new store at Selly Oak.
Tesco has offered £3 million toward new leisure facilities and road improvements for a store at Yardley and £500,000 for a local school in connection with a planned store at Hodge Hill.
But some councillors have condemned the payments.
Labour's Chaman Lal (Lab Soho) warned recently that it was difficult to persuade people that the process was perfectly legal and above board.
He asked: "How can you persuade people that this isn't a bribe?"
Labour MP Liam Byrne (Hodge Hill) said it was important section 106 money was spent in the areas development was taking place.
He said: "The city council is planning to use the money from Tesco to pay for development in the city centre, when we need facilities here in Hodge Hill. It is a real smash and grab exercise.
"We are in favour of section 106 agreements but the money must be targeted properly."
In a report published today the Audit Commission said some communities could be missing out because authorities failed to demand enough.
Councils should ensure developers were contributing a fair share of the extra cost their projects would impose, should as increased demand for housing or strain on the transport infrastructure, the commission said.
Chief executive Steve Bundred said: "Councils with weaknesses in their approach to Section 106 agreements are less likely to secure community benefits.
"This report aims to help councils implement effective changes, encourage a strategic approach and test the financial impacts of policies on developments.
"Developing a comprehensive set of policies and supporting procedures will require time, commitment and resources, but our report and the range of guidance will help councils move forward and secure rewards."
As a result of its findings, the Audit Commission said it has produced guides and checklists to help authorities.
It has recommended councils develop Section 106 policies and procedures and make sure council leaders under-stand how potential developer contributions can help create sustainable communities.