The chancellor said in his first Autumn Statement today that housing remains unaffordable for too many in the UK and that London will be getting its share of the affordable housing budget.
Hammond said: "London is one of the most vibrant, dynamic, productive cities in the world and we want to keep it that way."
Mark Boleat, policy chairman at the City of London Corporation, said: “A commitment to increase the amount of affordable housing in the capital is a great step forward. The £3.15 billion over the next five years will go some way in alleviating a problem which seriously undermines our position as a leading global city.
"Too many workers in London face problems in finding affordable and suitable housing. Unless we take steps to tackle this problem then it simply drives workers away from London and benefits other leading financial centres, particularly those across Europe."
The infrastructure fund will be used to create new transport links to unlock land for house building.
"The challenge of delivering the houses we so desperately need in the places where it is least affordable is of course not a new one but the effect of unaffordable housing on our nation's productivity makes it an urgent one," Hammond said.
Anthony Lee, joint head of residential advisory and consulting at BNP Paribas Real Estate, said: “While any additional funding towards affordable housing is welcome, as is more flexibility on how funds can be used, the amount proposed is unlikely to achieve the delivery of 40,000 new rented homes that the government suggests.
"Before 2010, when grant funding was previously available to fund affordable housing in private-sector led developments it was typically provided at around £30,000 per bed space, or £130,000 for a three-bed unit. However, since that time, house prices in many parts of London have almost doubled, so any grant funding has to work harder to achieve the same outcome that would have been possible in 2010.”
Hammond said today that the new secretary of state for communities and local government, Sajid Javid, will be delivering a White Paper on housing.