The Guernsey Housing Association plans to work with local builders Infinity Construction to create 21 homes, 15 of which the GHA will buy and rent to healthcare professionals.
The States say this is a 'win-win' scenario, as the location next to the hospital entrance is ideal for those working there, while the other six homes help meet demand more widely.
The build could begin in spring 2024, with an estimated 18-month timeline, if planning permission is granted quickly.
The GHA's Chief Executive, Victoria Slade, says it will help address two major challenges for the island, demand in the housing market and a need for healthcare staff:
"This is about making the best use of that particular site.
Key worker for health and social care comes under the Affordable Housing Development programme, so it was about having a discussion with Infinity, with the backing of the States, to explore whether we would be able to do something together.
In terms of the whole island, why is it a good thing? Well, housing supply is the biggest issue that we've got, across all tenures.
So this is a really good test to see if we can work well with the private sector and meet different aspects of that supply."
She says this could change how the organisation expands in the future:
"This joint venture with Infinity to create both private and key worker housing is an exciting opportunity to work in a new way.
It gives assurance over contractor availability and shares the responsibility for delivering the units at the required standards, on time, within budget.
If this model is successful, this could be an approach that may be followed on other sites owned by the GHA, that would see the development of both affordable housing and private market housing alongside each other."
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