The £1.3bn land assembly fund will be used to acquire land needing work to prepare it for market.
This work will be carried out by Homes England outside of London with the aim of making it less risky for developers to invest in land and start building.
The £630m small sites fund will grant funding to public land owners and local authorities.
This is designed to speed up getting the right infrastructure in place to support housebuilding on stalled small sites.
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The government will work closely with the Greater London Authority to help ensure targeted funding via the two new funds can deliver additional homes in the capital.
James Brokenshire, secretary of state for housing, communities and local government (pictured above), said: “We need to act on a number of fronts to build the homes this country needs.
“The availability of this investment will help us intervene in the sort of sites that aren’t yet ready to build on, or where developers have been put off.
“Developers can now get straight on with building homes, rather than overcoming the barriers to build.
“And in the same way, we are also supporting councils that have land for housing, but need additional help to enable development.”