The government has announced that contingency funding will be allocated to finance the London 2012 Olympic Village and media centre.

A total of £394m was agreed from the Olympic Funders’ Group contingency, the part of the budget designed to guard against risks outside the control of the Olympic Delivery Authority (ODA), while separately, £67m has been released from the ODA’s programme contingency. The £9.3bn overall budget remains the same.

The use of the contingency funds – £326m towards the Olympic Village and £135m towards the media centre – is needed to meet a shortfall in private sector funding as a result of the financial crisis.

Olympics minister Tessa Jowell said: “The village and media centres are absolutely essential to a successful London Games with a real lasting legacy. With private sector funding now much more difficult to secure because of the global economic downturn, it is right that we take steps to safeguard these projects.

“The extra funds we have allocated come from existing contingency funds within the overall £9.3bn budget. Lower than anticipated construction inflation and good progress across the project has reduced risks, meaning that the overall budget is unchanged and enough contingency funds remain. We are determined to deliver the Games within budget.”

The Village will house up to 17,000 athletes during the Olympics and more than 6,000 during the Paralympics. After the Games, about one third of the apartments will be available as affordable housing.