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At least seven councils are believed to be considering applying for the money from the Homes and Communities Agency.

Exeter, Wandsworth and Bolton councils confirmed they are considering putting schemes forward for the fund, half of which is grant and half borrowing.

Councils would repay the loans from the rents generated by the new homes.

Exeter has between 10 and 15 schemes on the drawing board with a total of about 130 homes, some of which could be put forward for the funding. It is likely to work with its regular housing association partner, Sovereign.

Steve Warran, head of housing services at the council, said: 鈥淎ny additional affordable housing at this time is a good thing and councils are ready and willing to build it.鈥�

Wandsworth council is considering putting in a bid for a 拢5m scheme of 32 homes on unused land behind one of its council estates.

Bolton council is also considering the idea of a bid but would need approval from its executive and has not yet chosen a scheme to put forward.

The scheme was unveiled a fortnight ago. Councils applying for the funding must donate land for the schemes and submit bids by 31 July.