The government has committed £21m to kickstart the largest development of low-cost homes yet built in the north-east of Scotland.
Local housing associations will stump up £12m to build 209 homes for rent or shared equity at the former paper mill site in Tillydrone.
A further £22m will be invested by the Tenants First Housing Co-operative, Langstane Housing Association and private business.
Construction is due to start in August with completion in 2014. The urban village will also include office space and business start-up units, a children’s nursery, shops and a further 77 private homes for sale.
Housing and Communities Minister Alex Neil said the development was a “shining example” of co-operation between Aberdeen City Council, the Scottish Government and Devanha, an alliance of registered social landlords in the Aberdeen area.
“This development marks a historic milestone for social housing in the north-east,” he said. “It is the biggest project of its kind undertaken in the region, which will not only offer quality affordable homes for local families, but will also provide a tremendous economic boost for Aberdeen.
“It is excellent news for the hard-pressed local construction industry and related businesses.”
The urban village scheme has been in the pipeline for several years with the city council granting planning permission in April 2008.
Plans have also been put forward for the village’s electricity to come from its own power plant, which could generate twice as much energy as the community would need.