The cladding around the Grenfell tower block was deemed one of the key reasons why a fire in a fourth-floor flat spread so rapidly, killing 71 people in June a year ago.
"I've worked closely with the Chancellor and Housing Secretary, and I can today confirm that the Government will fully fund fun the removal and replacement of risky cladding by councils and housing associations, costing an estimated £400m".
The prime minister said "immediate action" was needed but added that this new funding "must not undermine" councils' ability to do their own maintenance and fix work.
Mrs May told MPs at Prime Minister's Questions: "Councils and housing associations must remove risky cladding quickly".
So far the Government has identified 158 high-rise block in public ownership where cladding should be stripped off.
Work has already started on 104 buildings, and the number of eligible schemes will be kept under review, the spokeswoman said.
The Local Government Association, which represents councils, said it had been in talks with ministers over the issue for some time.
"A series of commitments made by ministers up to and including the Prime Minister have not been honoured".
When asked why private landlords would not be receiving any cash, the spokesperson replied: "We expect private building owners to take responsibility themselves for removing and replacing cladding and not pass those costs on".
Councils have been urging the government since the fire to guarantee it will cover the costs of replacing potentially unsafe cladding, warning that the cost would prove excessive for many local authorities.
She said there were 210 households in total in need of a new home in the wake of the fire, of which 201 had accepted an offer of either temporary or permanent accommodations.
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