The government gave 11 hectares of land to a contractor to build a residential complex in Homa Bay.
Housing Minister and Cabinet Secretary Zakariah Njeru handed over the site at the Makongeni estate ahead of a groundbreaking ceremony presided over by President William Ruto later this month.
Building affordable housing is one of the priorities of President Ruto's government.
Other national government projects in Homa County include the construction of a non-motorized transport system from Kodoyo junction to Makongeni and the establishment of a fish market.
Mr Njeru, who was hosted by Governor Gladys Wanga on Thursday, said work at home should start before December 1.
During a visit to Teluk Homa last month, Dr Ruto said his government would build 5,000 units in Teluk Homa district.
He said Homa Bay is experiencing a housing shortage.
Most of the residents live in houses made of metal roofs.
The National Housing Corporation (NHC) has entered into an agreement with the district administration to do this work.
The houses will be built in stages. About 110 units will be built in the first phase, which will last 12 months.
This includes 40 two-bedroom apartments, 40 one-bedroom apartments and 30 studios.
The buildings will be four-story buildings.
"We have lines and construction pressure has to start," Njeru said.
At the site, contractor Ernie Campbell Company Limited will build a Tertiary Health Centre.
Ms Wanga said the city is already served by a teaching and referral hospital and the planned health center will improve health services.
"We already have a sewer system. All we have left is the water supply."
He asked the state to open a fire station in a project funded by the national government.
Other proposals for the site include putting in commercial properties to serve future residents and others.
Early learning schools are located nearby.
Charles Hinga, the candidate for secretary of state for housing, proposed that the project use clean energy by tapping solar energy and collecting rainwater that will be stored underground.
"Homa Bay must compete globally. But the project must be in the budget," he said.
Ernie Campbell of the site and Gopal Wagji, the company's managing director, presided over the award ceremony, which Mr. Njeru and Ms. Wanga hosted.
Ms. Wanga urged the contractor to recruit workers from Teluk Homa residents.
He said that this project will improve the living conditions of the residents and help with the housing shortage in the city.
The government also said it will ensure residents are given priority when providing new homes, with each family only allowed to buy one unit.
"In some areas, some people buy a lot of houses and rent them to others at high prices. This will not happen in Homa Bay," he said.
The project will provide employment opportunities for the youth of Teluk Homa district, he said, urging the contractor to use local materials and labour.
"Homa Bay has sand and other construction materials that can be used in the project. We also have craftsmen who can make good windows and doors that can be used in the project," he said.
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