LOSTWITHIEL will be the beneficiary of 32 new homes thanks to a £1.3 million investment from the Homes and Communities Agency (HCA).
Building began in Castle Hill Road on Tuesday, and will be undertaken by local firm Wycliffe Estates.
The development remained dormant for over a year due to the troubled economy, however the HCA's Get Britain Building programme has relaid the foundations.
Colin Molton, HCA executive director for the South and South West, said: "It is great news that work can continue at this project, which is delivering much-needed high-quality new homes.
"There's no doubt that this development will make a positive difference. It's good to see that the Get Britain Building programme is delivering new homes and safeguarding jobs in our area."
Sixteen of the homes in the development are classified as affordable, and all are already reserved. In conjunction with Lostwithiel Town Council, Wycliffe Estates conducted a survey prior to the development which identified more than 50 people interested in the new properties.
The first homes will be occupied from May 2013, with all 32 homes completed by 2014. One of the first to move in will be Dean Wheeler.
Father of two Dean, who runs The Barber Shop in Monmouth Lane, has been affected by the paucity of affordable homes in Cornwall.
"I've lived in rented accommodation for nearly 20 years and I have found it a struggle, as everyone has, to save enough to buy a house.
"To see these homes about to be built here is fantastic. We can't wait to move in."
Christopher Taylour, director of Wycliffe Estates, was not surprised by the level of interest: "As a local company, we know how tough the housing market here has been."