London mayor Sadiq Khan has announced funding for London boroughs that will enable them to purchase former council homes lost to the Right to Buy scheme.

The right-to-buy-back initiative will allow councils and local authority housing companies to acquire former council homes that were sold into the private market through the government’s 1980 Right to Buy scheme.

All the homes purchased through the scheme must adhere to the government’s Decent Homes Standard and be let at social rent levels or used as accommodation for homeless families.

The funds will be provided from the £4.8bn Affordable Homes Programme 2016-23 and councils can bid to build homes or buy existing homes.

“For more than 40 years, London’s precious council homes have been disappearing into the private sector, often never to be replaced,” said Khan, on announcing the new funding. “It’s time for that to change.

“We’re not only helping councils to build thousands of new council homes, but we’re giving them the resources to buy back former council homes through our right-to-buy-back scheme. In the midst of a housing affordability crisis, it feels grossly unfair and unjust that more than four in 10 council homes sold through Right to Buy in London are now in the hands of private landlords. These were, after all, homes built for the public good.

“I am proud that we have brought council home building back up to levels not seen since the 1980s and I’m encouraged by the enthusiasm I see from boroughs across London for building new council homes. Fixing the housing crisis is going to take time, but this new right-to-buy-back scheme is an innovative new tool that will help to take another step in the right direction.”

Councillor Georgia Gould, leader of Camden Council, said: “In Camden we are proud to be challenging a national failed approach to tackling homelessness by buying back homes that we have been forced to sell off through years of damaging Right to Buy policy, and using them to house homeless families in need of temporary accommodation in our borough.”

Mary-Anne Bowring, group managing director at Ringley, said: “There is a big question mark as to whether these homes should have been sold off in the first place without funding being provided to deliver replacement social housing, but as buy-to-let investors look to exit the rental market this seems like a smart policy that will boost the supply of accommodation for low-income households and the homeless.”