The government agency says the Greater Manchester Pension Fund, clients of listed wealth manager Mattioli Woods and other private institutional investors, have also committed to the initial close of the Newstead SME Real Estate Lending Fund.

The fund will be managed by Newstead Capital, which intends to grow the pot to £300m with subsequent capital raisings and deliver £1bn of finance over the fund’s lifetime.

The agency says the pot allows institutional investors to provide debt to smaller housebuilders filling a gap left by banks, which is an “underserved part of the market that faces significant challenges with access to traditional finance”.

Newstead Capital adds that use of the cash will focus on “energy efficient affordably priced” homes that will also drive local job creation.

Homes England chief executive Peter Denton says: “Our cornerstone investment in this fund signals government support for accessible and competitive finance to meet the needs of small and medium-sized enterprise developers across the country.”

Chair of Greater Manchester Pension Fund councillor Ged Cooney adds: “These new homes will help to address the housing shortage, contributing to levelling up and bring environmental benefits. The financial return from our investment will enable GMPF to meet its future pension obligations to its members.”

Newstead Capital chief executive Simon Champ says that the fund “is aimed exclusively at the unfulfilled need for capital from regional housebuilders. Regional housebuilding has historically been critical to the economy, providing the country with a diverse range of smaller housing communities.

“The fund gives pension, insurance, and wealth management institutions an appropriate long term investment platform to support this vital industry”.

He adds: “By meeting this demand, we will provide an attractive return for investors, including the taxpayer and Manchester retirees, while also empowering local SME builders to compete with larger housebuilders.”