The 99 new homes are being constructed by Gateshead Regeneration Partnership, a combination of house builder Galliford Try, affordable landlord Home Group and Gateshead Council in the Bensham and Saltwell area.
The first homes are expected to be completed by the autumn of 2015.
Councillor Mick Henry said: "These new homes are the first real result of this hugely significant regeneration project. They will create the choice and the variety of homes that this area so desperately needs.
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"Tyneside flats are great for some people but they can't provide an ideal home for everyone. With these new homes, people will have a real opportunity to stay in the area as their family grows.
"Reaching this day has taken longer than anyone wanted, particularly local residents; but we should not underestimate just how important this milestone is for Bensham and Saltwell."
The site off Saltwell Road was formerly occupied by Tyneside flats but was cleared some years ago. Later phases of construction in Bensham and Saltwell will see new homes built on two other sites, currently being cleared.
(CD/JP)
