It is hoped up to 20 extra homes can be bought

Limestone workings in the area have already led to 35 homes being demolished in Ferniehill Terrace and more are expected to be bulldozed.

Earlier this week, an independent inquiry team was set up to look at the reasons behind the decision to build the houses on top of former mine works in the 1960s.

Edinburgh City Council housing director Mark Turley welcomed the cash from Scottish Homes.

He said a community housing association would be formed in the area with the responsibility of renting out the homes bought with the grant.

Mr Turley said: "This should help people selling houses in the area who have had difficulty finding buyers because of the publicity surrounding subsidence in the south of the city."

Raft of measures

Council leader Donald Anderson described the scheme as "a start" and said the council was also in talks with the Scottish Executive aimed at securing more money.

Stuart Nichol, Scottish Homes managing director in Lothian, Borders and the Forth Valley, confirmed the funding package and said it would pay for between 10 and 15 homes for evacuees.

He added: "We're very keen to help in whatever way we can, which is why we have allocated this funding to provide houses for people who have had to leave their homes in the area.

"We expect that the money will help to buy 10 to 15 homes. Many more houses will be required and this is just one part of a package of measures being put together to cope with the problem."