CENTACARE will oversee the construction of 120 affordable housing units across the state over the next year.
The units will be built by next July in 11 sites, including Wynyard, Ulverstone, East Devonport, Riverside and Newstead, and occupied by next December.
Centacare Tasmania director Jen Day said the units would be available to low-income earners, people with disabilities and people aged over 50.
The $22 million project is supported by the federal government's National Rental Affordability Scheme, which aims to see 50,000 more affordable rental homes built by June 2016.
Bass Labor MHR Geoff Lyons said the government would provide $5 million for 49 units to be built at Riverside and at the St Michael's Association, Newstead.
He said the construction industry would benefit from much-needed work as would low-income families and individuals who were looking for affordable homes.
``These much-needed accessible rental properties will be rented at 20 per cent below the market value rent, giving long-term housing security to low- and middle-income tenants in our region,'' Mr Lyons said.
Centacare will invest $180,000 to develop each unit and will receive $7500 a unit from the federal government each year for 10 years to cover the subsidised rent.
The state government will contribute either land or $24,000 cash for each unit.