Hundreds of millions of pounds from dormant bank and building society accounts will be redistributed to help tackle homelessness and disadvantaged young people, the government has announced.

Around £330m (€370m) will be unlocked from the unused accounts and passed onto charities and other initiatives tackling societal challenges.

Over the next two years, the government is hoping these dormant accounts will contribute more than half a billion pounds towards building a "fairer society".

Tracey Crouch, minister for Sport and Civil Society, announced that £135m will be used by Big Society Capital (BSC) to find long-term accommodation for homeless people and those suffering with mental health issues.

A further £280m will be eventually also be allocated to initiatives across England to help disadvantaged young people into work, provide housing for families and vulnerable people, and tackle problem debt.

Crouch said: "By unlocking millions of pounds from dormant accounts for a range of good causes, we can make a real difference to lives and communities across the country.

"This is part of the Government's commitment to building a fairer society and tackling the social injustices that hold people back from achieving their full potential.

"I am grateful to the banks and building societies, as well as Reclaim Fund Ltd, for their work to free up these funds for good causes. Working in close partnership with the financial sector and civil society, we are determined to help create a country that works for everyone and build a Britain fit for the future."

An account gets classified as dormant if there have no transactions carried out for a period of 15 years in relation to the account or on the instructions of the holder.

The funding for social investment in England also includes £10m for BSC's sister organisation Access – the Foundation for Social Investment.

In a joint statement, Cliff Prior chief executive of BSC, and Seb Elsworth, chief executive of Access added: "This capital will enable many more charities and social enterprises to improve the lives of people all around the UK, delivering larger and more innovative solutions in the focus areas of homes for people in need, and supporting communities experiencing disadvantage."

The announcement arrived after the government was condemned for its "abject failure" in dealing with the national homeless crisis.

Meg Hillier, chair of the Department for Communities and Local Government (DCLG), said the government had been "unacceptably complacent" in their attempts at reducing rough sleepers in a report describing how in the run up to Christmas there were 9,000 people sleeping on the streets and 120,000 children living in temporary accommodation.