The funding – announced by the Department for Communities and Local Government (DCLG) – includes £1.9 billion for housing, £481 million for the redevelopment of the Olympic Park after this summer’s Games, and £390 million in "resource funding", which is spent on project running costs, such as salaries, as opposed to capital funding, which is spent on assets such as buildings.
The funding will come from the DCLG's existing resources for housing, regional development agency closure and Olympic legacy projects.
The funding covers the spending review period up to 2014/15.
A DCLG statement said the funding would support the mayor of London’s "four year commitment" to build 55,000 affordable homes by March 2015 and bring 45,000 existing social homes up to standard across London, as well as supporting the Mayor’s plans for the Olympic Park.
The move is intended to support reforms to the structure of housing and regeneration delivery in London contained in Localism Act 2011. Under the act, the Government will:
- devolve the activities of the Homes and Communities Agency in London – including the management of London's affordable housing programmes – to the GLA in April 2012
- abolish the London Development Agency and transfer its activities to the GLA by 31 March 2012
- enable the Mayor of London to establish a Mayoral Development Corporation to oversee the long term development of the Olympic Park and surrounding area by 1 April 2012.
Local government secretary Eric Pickles said: "This settlement hands real power to London allowing Londoners to manage their own affairs. The lasting legacy from the Olympics will showcase the regeneration and house building achievements that ensures London remains a truly great city."
Mayor of London Boris Johnson said: "This is a landmark agreement that sees responsibility and accountability for housing and regeneration resting squarely with London. We are now in a great position to drive forward vital investment that will deliver more affordable homes across the city, secure a lasting legacy in the Olympic Park and create thousands of new jobs."