The fund will support architects, developers, councils, housing associations and small builders to develop properties that will increase the quality of design.
The fund will help the government deliver on its pledge to build 200,000 starter homes by 2020.
It will also be used to acquire brownfield sites to provide land for starter homes.
The government has made up to £10m available for local authorities to prepare more brownfield land for development of starter homes.
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Communities Secretary Greg Clark said: "As a one nation government we are on the side of hard-working people and that is why we are committed to delivering 200,000 starter homes by the end of this Parliament, providing a real boost to aspiring young first-time buyers.
"This competitive fund will build homes that will clearly show the wide range of new properties that will be available for first-time buyers as they take their first step on the housing ladder.
"We are also helping bring back into use more brownfield land for development, keeping the country building and delivering the homes our communities need.
Housing Minister Brandon Lewis said: "Helping young people achieve their dream of home ownership is a real priority for this government. We've already helped more than 100,000 households buy a home through our ground-breaking Help to Buy scheme and starter homes are another game-changer.
"This fund will help kick-start that change and show young people across the country the quality they can expect when they buy a starter home."
(LM)
