Developer Renaker has been given a £55m loan from the Homes & Communities Agency to support the delivery of around 800 homes for private rent in Manchester and Salford.
Renaker will use £35.1m towards the development of 497 apartments at the Greengate site in Salford, and £20.2m towards 282 homes over two blocks at Cambridge Street near Oxford Road railway station.
Each site will include a mix of one-, two- and three-bedroom properties. Work is already underway, and the projects are expected to be complete by the middle of next year.
The investment comes from the government's £1bn build to rent fund which aims to support 10,000 homes across the UK for the rented market.
Loans from the build to rent fund are a fully recoverable investment where the government shares risk or bridges finance to help schemes to build, be managed and let.
The investment can be used to cover costs such as land, construction or management costs. Once the scheme is fully let the developer will sell on their interest or re-finance and repay the investment.
Housing Minister Brandon Lewis made the announcement to the British Property Federation annual conference on 10 February.
Lewis said: "Millions of people use the flexible option of renting so I'm determined to create a bigger, better private rental market offering greater choice for tenants.
"This extra money will not only create 800 more homes for the people of Manchester and Salford, it will also create jobs and security for hardworking people – a vital part of our long term economic plan to secure a better future for Britain."
Daren Whitaker, director of Renaker, said: "Each scheme has been meticulously planned and designed to deliver new and highly aspirational places to reside.
"Construction is progressing on both sites to schedule and will provide 779 new high quality homes in two extremely desirable central Manchester locations."