The investment in offsite starter home specialist Pocket Living will see work start on at least 1,059 new homes by March 2021, with a third expected to be built off-site in a factory and dropped into place.
Pocket one or two-bed flats are sold to local people at least 20% cheaper than market sales.
The funding, which will be paid back in full by the end of the next decade, will help finance ongoing site purchases for development.
This will enable Pocket to raise the rate of delivery of high-density flats on small brownfield sites in the Capital.
The funding package is part of the Mayor’s Innovation Fund, using investment secured as part ofthe Mayor’s £3.15bn deal with government in November last year.
Khan, said: “The housing crisis is the biggest challenge facing Londoners today and I have been honest from the start that we won’t be able to turn things round overnight.
“I am working with Pocket Living to build more than a thousand homes for first-time buyers, using the latest off-site construction techniques to provide attractive and affordable homes as quickly as possible.
“I will continue to use more of my £3.15bn of funding to invest in innovative schemes like this to build the genuinely affordable homes Londoners need.”
Marc Vlessing, CEO of Pocket Living, said: “Our mission has always been to open up the housing market to hard working young Londoners on low to middle incomes by delivering homes they can afford. This growing group is greatly in need of innovative housing solutions.”
The investment will be used alongside £35m of funding from the Homes and Communities Agency to build homes on the first set of sites to come forward.