The finance pot formed part of a set of measures that George Osborne claimed would support building of 200,000 new homes.
Until now Government guarantee schemes were limited to support for major infrastructure projects being developed by major house builders.
In 1988 two-thirds of all new homes were built by small and medium sized builders, but that figure now stands at less than a third.
The Builders Finance Fund hopes to galvanise local housing projects with loans to smaller housing developers.
It estimated that the fund will unlock 15,000 housing units stalled due to difficulty in accessing finance.
He said that the Government would also back three vast housing schemes: a garden city at Ebbsfleet, and schemes at Barking and Brent Cross to help get Britain building again.
He reiterated plans to extend Help to Buy to 2020, supporting construction of an estimated 120,000 new homes.
Osborne said the second element of Help to Buy, the mortgage guarantee for buyers, will now run until 2016.
“Taken all together, the housing policies I announce today will support over 200,000 new homes for families. We’re getting Britain building.” said Osborne.
Trio of flagship housing schemes
The government will work with London’s Mayor to extend the Gospel Oak to Barking Line to Barking Riverside. Osborne said public investment would unlock construction of up to 11,000 new homes.
It will also work with the GLA and the London Borough of Barnet to look at proposals for the Brent Cross regeneration scheme, subject to value for money and affordability.
This scheme has the potential to deliver between 7,500 and 10,000 homes, up to 20,000 jobs and about £4.5bn of economic investment.
The Government will set up a dedicated urban development corporation to drive forward the creation of Ebbsfleet Garden City, with a £200m of infrastructure fund to kick start development.
This will represent the first new garden city since Welwyn Garden City in 1920.
Osborne said the government would also publish a prospectus by Easter, setting out how local authorities could develop their own, locally-led proposals for bringing forward new garden cities.
The Government will also create another £150m fund to kick start the regeneration of large social housing estates.
He also said the Government would consult on a new ‘Right to Build’ to give custom builders a right to buy a plot from councils.
Government will test the new model with a small number of councils.
A new £150m Serviced Plots loan fund will help provide up to 10,000 serviced plots for custom build.
Councils will need to work with contractors or builders to access the fund. The Government will also look to make the Help to Buy equity loan scheme available for custom build.