The funding will aim to deliver around 119,000 homes, with 57,000 to be available for home ownership, 29,600 slated for social rent and 6,250 affordable rural homes to be built.
The £8.6bn of funding is part of a £11.5bn Affordable Housing Programme, which is made up of £2bn of funding from a long-term strategic partnership announced in 2018 and £9.5bn of new funding confirmed in the 2020 budget.
Around £5bn of the funding will be used to build houses outside London, delivered by government housing delivery body Homes England. The Greater London Authority will provide homes in London.
The government said that around 90 bodies, including councils, housing associations and private providers, have bid for their share of funding.
The funding is in addition to government schemes like the First Homes scheme, which offers new homes at up to a 30 per cent discount on market value, and the 95 per cent mortgage guarantee scheme.
Housing secretary Robert Jenrick (pictured) said that the funding was “landmark moment” for its Affordable Homes Programme and would ensure “good quality housing for all”.
He said: “This huge funding package will make the ambition of owning a home a reality for families by making it realistic and affordable.
“We are also ensuring tens of thousands of new homes for rent are built in the years ahead, including social rent, so those on the lowest incomes can enjoy good quality, secure rented homes, built and managed by reputable providers.”