The Lyvennet Community Trust has been given the green light for a housing project in Eden, Cumbria.
The Homes & Communities Agency has made an investment of £600,000 towards the scheme with a further £1m being provided from The Charity Bank.
Eden District Council also provided a £30,000 loan to the LCT to help with the early stages of the project last year.
LCT has appointed Penrith-based Atkinsons as contractor for the scheme to build 12 homes on the disused 2.25-acre Cumbria Stoneworks site in Crosby Ravensworth, which has remained redundant since 2003.
Ten homes will be available for rent and two for shared ownership, with a mixture of two and three bedrooms.
The HCA said an additional eight properties are also planned. LCT added that the site is restricted to a total of 22 homes.
David Graham, chairman of LCT, said: "The approval of funding for our scheme marks a major milestone for our housing plans. After all the effort put into the LCT by the local community, it is superb to receive such vital support from the HCA, Eden District Council and the Charity Bank to help progress our vision to this exciting stage."