A total of 18 new homes are being developed on the site of the former Dairy Crest premises off Quarry Street and Old Milverton Road.
Existing buildings on the site have already been demolished while the first foundations have been laid for the properties. The first homes are scheduled to be ready by this autumn.
Pat Moroney, of the Deeley Group, said: "Leamington is crying out for more affordable homes so we are delighted to be working in partnership with Waterloo Housing Group to deliver this project.
"This is a former brownfield site which we are bringing back into use, providing much-needed homes for local people. This is the latest in a series of affordable housing schemes we have worked on in the area, as our agility and knowledge of the market mean we are able to provide exactly what is needed for the local area."
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Anthony Riley, Group Director of Development and Operations at Waterloo Housing Group, said: "We are pleased to be working with the Deeley Group again in Leamington Spa, following the successful completion of the development in Queensway.
"This scheme provides another great opportunity to work together with the W2 Partnership and Warwick District Council to deliver the much needed new homes for local people."
Cllr Peter Phillips said: "We welcome the start of construction of new homes on this new site, which alongside current developments of 39 homes on Theatre Street in Warwick and more than 170 homes on Station Approach in Leamington further demonstrates our commitment to the provision of affordable homes in our district.
"Their location in close proximity to both Leamington Spa and Warwick will make these properties an ideal choice for families and young people wanting to stay in or move into the area."
Image: Pat Moroney (Deeley Group), Andy Bodily (Deeley Construction contracts manager), Richard Pepper (Deeley Construction site manager), Hazel Pennington (Waterloo Housing Group).
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