The mixed development of 11 family homes and bungalows is being built by housing association Isos in Boldon Colliery, on the site of former local authority garages and a day centre next to Wilfred Street in the village.
Isos has worked with South Tyneside Council to develop the site, which sits alongside the River Don.
Lea Smith, development and regeneration manager for Isos Housing, said: “It’s so important for communities like Boldon Colliery that a landlord such as Isos keeps building affordable homes.
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“It’s not just about those residents who move into the new homes, it’s about the properties they leave behind, which will help their neighbours find the homes they need.
“We also know that for the local economy to thrive, employers need to know there are good quality, affordable homes and services available for their staff.”
Isos says it is keen to build a wide variety of new affordable homes, to meet the needs of all sections of the North East community. It is aiming to deliver 200 new homes per year for the next three years.
While in Boldon Colliery, all the homes are being made available for rent, elsewhere in the region Isos is building shared ownership homes, and purchasing homes straight from major housebuilders, which will then be let to local families for affordable rent.
Coun Allan West, lead member for housing and transport at South Tyneside Council, said: “We’re delighted to be working in partnership with Isos and the Homes and Communities Agency to deliver these much needed affordable homes in Boldon Colliery.
“We’re committed to providing good quality housing to meet our residents’ needs and I’m confident this scheme is going to help create a better future for local people.
“I’m looking forward to seeing this development take shape over the coming months.”
Isos is also completing a development of 18 flats on Temple Park Road in South Shields, and preparations are being made to build a 37 home development in Tyne Dock.
The three schemes between them add up to 66 homes and around Â£6.5million worth of investment in the borough.