Council houses will be built in Stamford and Grantham for the first time in almost 15 years.
South Kesteven District Council’s cabinet has agreed to budget £1m in the financial year beginning in April and a further £2m during the following 12 months to build about 30 new homes.
The last council houses in the district were completed in 1999.
Possible sites are still being examined, but construction is likely to take place on council-owned land in Grantham and Stamford.
The council says about half of the new homes will be built in Stamford and half in Grantham.
Work is scheduled to begin in the summer and new tenants could be moving in about a year later.
Leader of the Council, Coun Linda Neal (Con), said: “We have ambitious growth plans to maximise the massive potential of our district and providing social housing is very much a part of our strategy.
“Building 30 homes is a modest beginning, but now that changes in housing legislation have been made that allow us far more flexibility this will signal the start of a building programme that will run for years to come.
“As well as providing much needed homes in our district, the programme will also generate scores of new construction jobs and secure many more through the purchase of materials and services.”
Existing council tenants have not been forgotten, with improvement work planned on 750 council-owned properties across the district.
Housing portfolio holder, Coun Terl Bryant (Con) said more than 150 tenants in Grantham were already enjoying warmer homes and smaller heating bills thanks to insulation and energy efficiency measures that have been fitted in their homes.
Coun Bryant added: “The work was funded through the Community Energy Saving Programme and over the next two years we are aiming to extend the project to a further 750 properties in both urban and rural locations at a cost of a further £4.9m which will once again be largely externally funded.
“We are also budgeting £5.7m on repairs and care services in 2013/14 and a further £6.1m in 2014/15.
“Providing good housing for everyone is a priority for this council and the work we are doing in both the private and public sectors is clear evidence that we are making real progress towards our goal.”
The news comes as a double boost for new housing in the district as figures just released show that the Local Lend A Hand scheme introduced in the spring has already led to eight first-time property buyers now owning their own homes thanks to a council project supporting mortgage deposits and there are another five purchases in the pipeline.
Coun Neal added: “Our pilot was launched with a £1m council pledge to reduce the deposit required from 20 per cent to just 5 per cent, with the difference guaranteed by the council.
“With interest right across the district, guarantees so far have accounted for a quarter of the pledge, opening the way for many more first time buyers to take advantage in the new financial year beginning in April.
“On a typical £100,000 house purchase, many lenders require a buyer to raise a £20,000 deposit. The council guarantee, run in partnership with Lloyds TSB, reduces that to £5,000 provided that the maximum mortgage needed is not more than £125,000 and that the property is not a new build.
“This project is already making a real difference by helping first time buyers to get onto the housing ladder and at the same time stimulating the local housing market.”