Rachel Reeves says the top up to the Affordable Homes Programme comes ahead of the government’s housing strategy review due in the spring.

The extra cash, announced over the weekend, comes alongside moves that will see the stock of social housing lifted through a new five-year social housing rent settlement.

The Treasury says this measure “will give the sector more long-term certainty on funding and allow them to invest in tens of thousands of new homes”.

It adds: “The existing stock will also be protected by reducing Right to Buy discounts so that thousands more council homes remain in the sector.”

The move is part of Labour’s drive to build 1.5 million homes over the next five years. Over the last five years, the country built around 1 million houses.

Reeves said: “We need to fix the housing crisis in this country. It’s created a generation locked out of the property market, torn apart communities and put the brakes on economic growth.”

The government will set out new funding plans to succeed the current 2021-26 Affordable Homes Programme during the Spending, due to end next spring.

The government said: “This will lay the foundations for the manifesto commitment to deliver the biggest increase in social and affordable housebuilding in a generation, and to support councils and housing associations to build their capacity and make a greater contribution to affordable housing supply.

“It will deliver a mix of homes for sub-market rent and homeownership, with a particular focus on delivering homes for social rent.”

The Treasury will also consult on a new five-year social housing rent settlement, “which caps the rents social housing providers can charge their tenants, to provide the sector with the certainty it needs to invest in new social housing.

It adds: “The intention would be for this to increase with consumer price index inflation figures and an additional 1%.

“The consultation will also seek views on other potential options to give greater certainty, such as providing a 10-year settlement.”

The Treasury adds that Right to Buy discounts of social housing “will be reduced alongside greater protections for newly-built social housing and councils will be able to keep 100% of the receipts generated by a Right to Buy sale.

“This will enable councils to scale-up delivery of much-needed social housing while still enabling longstanding tenants to buy their own homes.”

Lloyds Banking Group chief executive Charlie Nunn said: “As the biggest supporter of social housing in the UK, we welcome the announcement of the funding boost for the Affordable Homes Programme and the plans to consult on a long-term social housing rent settlement.”

Deputy Prime Minister Angela Rayner added: “This is a further significant step in our plan to get Britain building again, backing the sector, so they can help us deliver a social and affordable housing boom, supporting millions of people up and down the country into a safe, affordable and decent home they can be proud of.”

Currently, Right to Buy discounts offer council tenants up to 70% off their home purchases.

Last year, 10,896 homes were sold through Right to Buy while only 3,447 were replaced. Since 1991, the scheme has seen 24,000 social homes move into the private sector, according to official figures.

Tenants can buy their homes if they have lived in social housing for three years, at a maximum discount of £102,400 across England, or £136,400 in London.

The Right to Buy scheme was introduced in 1980 by former Conservative Prime Minister Margaret Thatcher as one of her flagship reforms.

Since 1980, there have been 2,026,893 home sales under the Right to Buy scheme, according to Department for Housing & Communities data in March.