Construction work on the first of the government's discounted "starter homes" for first-time buyers will start in 2017, Housing Minister Gavin Barwell has confirmed, despite concern among councils that they will hold back the supply of affordable homes for rent.

Thirty councils across England will receive investment from the £1.2bn (€1.4bn, $1.5bn) Starter Homes Land Fund to buy and bring up to scratch brownfield sites so these homes can begin to be built.

"This government is committed to building starter homes to help young first-time buyers get on the housing ladder," Barwell said. "This first wave of partnerships shows the strong local interest to build thousands of starter homes on hundreds of brownfield sites in the coming years. One in three councils has expressed an interest to work with us so far."

Starter homes, introduced under the controversial Housing and Planning Act 2016, will come with at least a 20% discount on their market value for first-time buyers between the ages of 23 and 40. The government hopes to see 200,000 built by 2020.

They will be subject to a price cap of £250,000 outside London and £450,000 in the city and cannot be sold on at full market value by the owners for the first five years. Under the housing act, planning authorities have a general duty to promote the supply of starter homes.

Moreover, starter homes will formally be classed as affordable housing. Some councils argue this will cannibalise the much-needed supply of homes for affordable rent as developers prioritise the construction of more lucrative starter homes.

"Ultimately, local areas will need discretion on the number of starter homes required in new developments," said Cllr Martin Tett, housing spokesman for the Local Government Association (LGA), which represents councils.

"This will allow councils to ensure a mix of homes – to rent and buy – are built which are affordable for those people that need them and that are crucial for enabling people to save money towards a deposit."

The 30 Starter Home Land Fund partnerships are:

Blackburn with Darwen Council

Blackpool Council

Bristol City Council

Central Bedfordshire Council

Cheshire West and Chester Council

Chesterfield Borough Council

Chichester District Council

City of Lincoln

Ebbsfleet Development Corporation

Fareham Borough Council

Gloucester City Council

Greater Manchester Combined Authority (Bolton, Bury, Manchester, Oldham, Rochdale, Salford, Stockport, Tameside, Trafford, Wigan)

Lincolnshire County Council

Liverpool City Council (in association with Sefton, Knowsley, Halton, Wirral, St Helens)

Luton Borough Council

Mid Sussex District Council

Middlesbrough Council

North Somerset Council

Northumberland County Council

Pendle Borough Council

Plymouth City Council

Rotherham Metropolitan Council

Rushmoor Borough Council

Sheffield City Council

South Kestevan District Council

South Ribble Borough Council (in association with Preston City Council and Lancashire County Council)

South Somerset District Council

Stoke-on-Trent City Council

West Somerset Council (in association with Taunton Deane Borough Council, Sedgemoor District Council)

Worthing Council