Although there have been a number of previous attempts to revamp the VC since it shut its doors in 2000, none of them has been completed.
The landmark building, which was built in 1882, has planning permission for conversion and development to 24 flats, but it failed to sell at an auction earlier this year.
It is hoped this funding will finally see the building brought back into use.
Bromley-based developers Grigg&Crouch bought the club through a private sale earlier this year for £190,000 with the ambition of converting it.
The company applied for a grant through the NUE, which is an initiative run by Kent County Council in partnership with 12 local authorities, including Swale, to revamp empty buildings.
This is the largest project to be undertaken in the borough through the scheme.
The money will be used to fund the first phase of the project, which is to create nine new apartments at a total cost of around£400,000.
It is expected the initial work will be completed by summer.
Swale council’s cabinet member for housing, Cllr Derek Conway, said: “We were one of the founding members of NUE and are fully committed to the scheme as a means of delivering new homes at minimal cost to the taxpayer.
“We have invested a great deal of time and resource into this particular project, as we were determined to transform this neglected building into something valuable for the community.
“It is the most ambitious project we have ever undertaken under this scheme in the borough and it is fantastic to see work under way on site.”