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The £1 billion Olympic Village was completely nationalised today after Games chiefs finally abandoned plans to raise private funding.
Olympic chiefs announced that a total of £650 million would be taken from the 2012 contingency pot.
A further £268 million will be provided for the social housing element of the project from the Government's Homes and Communities Agency.
The agency, run by Communities Secretary Hazel Blears, will part-fund the deal through private lending at commercial rates.
Today's deal brings the total bill for the village, including the £147 million post-Games conversion cost — to £1.095billion. The package was agreed last night by the funders committee of government ministers. During the bid for the Olympics it was anticipated that the village would be funded entirely by the private sector.
In the latest raid on the contingency fund, ministers released £324 million — on top of £326 million approved from the same source a few months ago.
With more than three years until the Games, only £702 million remains "unallocated" from an initial contingency pot of £2.7 billion.
The village's Australian developer Lendlease offered £375 million in cash and loans but this was rejected as "not in the best interests of the taxpayer".
Ministers offered a verbal guarantee that at least a third of the village's cost would be recouped in property sales after the Games. The Olympic Delivery Authority has scaled back the project from 4,000 to 2,800 apartments.
Affordable homes will make up 1,400 units and will be run by Triathlon Homes, a consortium of social housing groups. The ODA also revealed plans for an 1,800-pupil secondary school set in 10 acres of parkland on the village site after the Games.
In its quarterly update on the 2012 budget the Government said the anticipated final cost of the Games — after village receipts — would be £7.234billion, down £179million from the last quarter.
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Olympics Minister Tessa Jowell said: "The funders decided that a public sector approach offered better value for money than a deal with the private developer and would cost substantially less public money in the long term." Tory shadow Olympics minister Hugh Robertson said: "Today's announcement is an unwelcome reminder of the severity of the current economic crisis.
Despite enormous infrastructure improvements around the park it still proved impossible to attract private sector investment on favourable terms."
More than three years until the Games and only £702million remains in the contingency fund.