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Public land is to be offered to builders in return for an equity stake in developments, as part of plans to spend the extra £1.5 billion for housing announced yesterday.

The scheme is one of four ways in which the money will be allocated by the Homes and Communities Agency, which is tasked with delivering 20,000 homes over two years through the investment.

The public land programme will see the HCA and other public sector organisations offer land to developers in exchange for an equity share. This particular aspect of the plans is designed to deliver 500 homes ‘initially’ and bring new players into the house building market.

The remaining 19,500 homes will be delivered through the extension of existing schemes.

Up to £750 million will go into the National Affordable Housing Programme to be allocated to the HCA’s existing development partners, which will be expected to produce and extra 12,500 homes.

Up to £500 million will be added to the £400 million kickstart fund, which helps get work moving on stalled developments. This is expected to contribute 4,000 homes on top of previous expectations.

The remaining £250 million will go to local authorities, to build 3,000 homes. This is on top of a £100 million fund for the same purpose, which was announced in the Budget.

Prime minister Gordon Brown announced the £1.5 billion investment in housing yesterday, as part of a range of reforms set out in a policy paper, Building Britain’s Future.

HCA chief executive Sir Bob Kerslake said: ‘We are well prepared for this. We have had an excellent response from our housing association and developer partners to our flexible grant rates through which we were able to fully deliver our programme last year, and the response to our existing £400 million kickstart programme has also exceeded expectations.’

The HCA said it received 305 bids for the existing kickstart scheme, but would not give the value of the bids.

Successful bidders for the existing £100 million local authority fund are expected to be announced in September.