The government has paid £6.5m for the Kenilworth Vinery in the Vale, to develop up to 135 affordable homes.
The site off Saltpans Road already has an approved development framework, having been designated a housing priority area under the Island Development Plan.
Up to 135 homes could be built there, depending on the size and layout of a development.
The States of Guernsey says, with 500 households on waiting lists for affordable homes it is 'essential' it takes 'urgent action to begin the process of increasing suitable housing stock'.
The development will be led by the Guernsey Housing Association and will be a 'mixed development' offering partial ownership properties, social rental housing and key worker housing.
It is likely to be smaller one and two bedroom accommodation, with a public open space at the western end.
The purchase of the land was approved by the Housing Action Group, which is made up of a number of government committees and has been looking at options for providing 'quick and innovative solutions' to the island's housing shortage.
The group includes the Presidents of Policy and Resources, Employment and Social Security, Environment & Infrastructure and the Development and Planning Authority.
It is also looking at other undisclosed sites - including ones already owned by the States. The government says none are 'as ready' as Kenilworth Vinery to accommodate a large number of homes at speed.
"The purchase of Kenilworth Vinery offers an immediate opportunity to get development of much-needed housing stock progressing quickly. It has been earmarked for housing for many years and is well-positioned for this kind of development.
We know that housing is a significant issue for the whole island and this development can help, but we also know that people naturally don’t want further development close to them.
We also know there is a general narrative of developments focused in the north of the island. While the facts don’t bare this narrative out in terms of actual properties developed in recent years, it is factual that the main centres identified for development are in St Peter Port, the Vale and St Sampson’s. We are mindful of needing to balance the needs of the whole island for more affordable housing, with those of localised communities understandably wary of development on their doorstep." - Deputy Peter Roffey, Chair of the Housing Action Group.