Local council official Mazin al-Shihan said another 150-caravan camp would be completed in a few days in eastern Baghdad.
"These new camps will not erase the suffering of these families but at least they are better than living in tents, which are terribly hot during summer and very cold during winter," al-Shihan told IRIN.
"These new camps are also intended to reduce the humiliation and embarrassment these families feel living in tents," he said.
Each 40-square-metre caravan - which contains two bedrooms, a living room, toilet and kitchen - is valued at 18 million Iraqi dinars (about US$15,500), he said, adding that the measure was "temporary, until these families return to their areas".
He said IDPs needed more help both from the government and the international community "as we are into year three".
Last August, the International Organization for Migration (IOM) said daily life for the thousands of IDPs living in tent camps was grim, despite a decrease in the rate of people fleeing their homes during the first half of 2008.
The IOM said camp residents had little or no access to basic services, could not adequately protect themselves against the elements, and were far away from medical, education and other services.
It said these conditions, without privacy and personal dignity, made tent camps a last resort for the IDPs. Information on the number of IDPs living in tent camps is not available.
According to the UN Refugee Agency (UNHCR), over 4.2 million Iraqis have fled their homes since the US-led invasion of Iraq in 2003. Of these, about 2 million are living as refugees in neighbouring countries - mostly in Syria and Jordan - while the remainder are IDPs.