Housing Secretary Robert Jenrick promised to "bear in mind" criticisms of the Government's Housing Infrastructure Fund (HIF), where a large majority of the money is allocated to London and the South East.
Thirsk and Malton MP Kevin Hollinrake questioned Mr Jenrick over the scheme in the Commons and asked whether "we need to address the inherent unfairness in the operation" of the fund.
In March housing experts warned that Yorkshire and the rest of northern England are being "frozen out" of vital home-building schemes because of funding criteria which favour London and the South East.
It is feared that without investment in housing in the North imbalances in the UK economy will continue to deepen, making it harder to retain talent, attract investment and increase productivity. Housing associations across northern England have teamed up to call for the so-called '80:20 rule' to be scrapped.
Rules designed to tackle the over-heating housing market in and around the capital mean the vast majority of northern councils are not eligible to bid for 80 per cent of funds handed out by government agency Homes England to help them build new homes.
Homes For The North (H4N), which represents 17 housing associations across the region, said in March that the North's share of funding to help deliver new homes could be slashed by 50 per cent unless a new approach to distribution of investment is taken.
And Prime Minister Boris Johnson was warned that the North will struggle to fulfil its potential and deliver his 'levelling-up agenda' unless it gets a fair share of funding to build badly-needed new homes.
As an example, it cites the £2.3bn HIF designed to help build up to 100,000 homes, which has seen just £23.4m handed out to the entire Yorkshire and the Humber region so far and some poorer areas such as Bradford and Hull miss out entirely.
By contrast it says North Kent has received £219m from the same scheme despite having a much smaller population.
The focus on tackling 'affordability' pressures in London and the South East means areas with high levels of deprivation are largely being excluded from funding, says H4N.
During Commons question, Mr Hollinrake asked fellow Conservative Mr Jenrick if he agreed "that we need to address the inherent unfairness in the operation of the housing infrastructure fund, which allocates 80 per cent of its budget to London and the south-east and only 20 per cent of it to the rest of us?"
Mr Jenrick said and Mr Hollinrake "have agreed on this point for some time". He added: "The housing infrastructure fund directs funding to those areas where there is the greatest affordability challenge.
"That is important, in some respects, but any Government who wants to level up must also direct infrastructure investment for housing to other parts of the country as well. I will certainly bear that in mind as we design the successor to the housing infrastructure fund later this year."
Nigel Wilson, Chair Homes for the North said: “It is good to hear that the Secretary of State is aware of the issue, and we’re grateful to Kevin Hollinrake for raising this. The Prime Minister has signalled the Government’s serious intent to level-up the country, and housing investment has a key role to play.
“Homes for the North have the support of leaders across the North to secure more public funding to deliver more quality affordable homes, including MPs, elected mayors, local authorities, chambers of commerce and the NP11 alliance of Northern LEPs.
“We strongly believe that this widespread support demonstrates the consensus, across the North, that everyone deserves a quality home and that delivering this is essential to the levelling-up agenda.
“If the Secretary of State wants to look at changing the way funding is handed out for housing infrastructure projects we would suggest scrapping the 80:20 rule and replacing it with a Levelling-Up Housing Infrastructure Fund (LUHIF).
“Simply put, this would ensure housing provision and regeneration is supporting levelling-up objectives and provides the North with the tools to deliver the homes required for transformational growth.
“If the Government wants to level-up, then this is one way in which they can demonstrate it to the North.”