The mixed-use building will include 36 units for those on very low to moderate incomes, who may have other housing assistance needs.

The development is being delivered by not-for-profit organisation Compass Housing as part of a contract granted under the state government's $1.1 billion Social and Affordable Housing Fund.

The fund pays monthly service fees to community housing providers for managing social and affordable housing properties once the properties are built and tenant services in place.

Minister Ward said the fund would create 3400 additional social and affordable housing dwellings by 2023 across the state. Compass Housing is set to deliver 500 of those.

"The sorts of people going into those properties are those potentially at risk of homelessness, including those who may have been living in unstable or dilapidated housing, so this program has delivered safe and secure housing," he said.

Compass Housing group managing director Greg Budworth said the organisation would manage support services for tenants once the building was completed.

"We've always said that community housing was about more than just providing homes, it's also about creating empowered tenants and sustainable communities," Mr Budworth said.

"We're extremely pleased that as part of the SAHF the NSW Government has recognised the importance of tailored support coordination service to help tenants maximise their economic and social participation."

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