Newcastle City Council, NSW, and Compass Housing will each contribute $3 million towards an affordable housing development in the inner-city.
Eight of the 17 one and two-bedroom units on Station Street, Wickham will be reserved for key workers, with the remaining nine for social housing tenants.
The project will provide homes for workers such as teachers and emergency services personnel and will typically see rents capped at 30 per cent of household incomes.
"Council's contribution comes from Building Better Cities funds and will be provided once 80 per cent of the project is completed," Lord Mayor Nuatali Nelmes said.
"The joint venture will provide homes close to transport and jobs to ensure a healthy diversity of inner-city residents as part of Council's well-rounded city centre revitalisation efforts.
"Without affordable housing in growth corridors, many people will struggle to find suitable accommodation and be forced out of these areas.
"I call on the housing development sector, relevant government agencies, NGOs and the community to follow Council’s lead and help create a community that looks out for each other."
Compass' Group Managing Director Greg Budworth welcomed Council’s support for affordable housing given the chronic shortage in Newcastle and the Hunter.
"Compass Housing is using funds leveraged from its existing housing assets, some obtained from other State and Federal Government housing initiatives such as the Nation Building Economic Stimulus Plan, to support this project," Mr Budworth said.
This is the latest affordable housing project to be delivered using the $12.5 million Council secured via the 1996 Building Better Cities program.