S J Roberts will build the 45 new homes on behalf of Mid-Wales Housing Association and has promised that 80% of the labour will be from with 10% apprentices.
The development will also secure work for subcontractors and suppliers from the local area.
Of the total properties, 23 will be let on the open market, with the remaining 22 let directly by the social landlord as affordable housing.
The development is on land at Red Bank, to the north of Welshpool town centre, and was purchased from Welshpool Town Council, which has worked closely with S J Roberts and Mid-Wales Housing Association on the plans.
The new homes have been designed by Hughes Architects, of Newtown.
Work on site will start this month and the contract is scheduled to be completed by November 2013.
The development will be comprised of a range of two, three and four-bedroom houses, three and two-bedroom bungalows and two-bedroom flats, creating living space for more than 200 people.
Managing director of S J Roberts Construction Ltd, Michael Sambrook, said: “We are thrilled to have secured such a prestigious build contract that will enable us to deliver high quality, affordable homes to benefit the community in Welshpool.
“This opportunity secures jobs for our workforce as well as ensuring the benefits of the investment are felt directly by construction workers in the Mid Wales area, including opportunities for young people to enter the sector as we recruit apprentices as part of the project agreement.”
Jude Boutle, Mid-Wales Housing Association’s development manager, said: “We are not only pleased to be providing much needed affordable housing in the town, but also that the contractor has agreed to support local employment by agreeing to ensure that 80 per cent of the labour that they employ will be local.”