Stafford and Rural Homes (SARH) is building 35 homes and apartments at Exeter Street, due to be completed later this year.
It follows the wider £10m transformation of the Penkside area of town which has seen the refurbishment of more than 300 homes as well as shops across six streets.
When completed the latest development will provide seven, one bedroom apartments; five, two bedroom apartments; and 24, two, three and four bedroom houses for rent.
All have been designed to blend in with the wider regeneration scheme called Total Place.
Chief executive Karen Armitage, said: "This really is a landmark project that re-enforces our commitment to providing quality, affordable homes to meet local needs.
"At the same time it is providing a real focus for the regeneration of one of the town's best known neighbourhoods on a key route into Stafford. As part of Total Place, SARH has already refurbished hundreds of homes alongside a host of other works to improve the local environment. This new-build will complement all that's already been done to transform the neighbourhood into an area the community can be proud of."
"I'm delighted to see that work is progressing well on site." Clive Jessup, managing director of Jessup Brothers, said: "We are delighted to be working with SARH on this exciting scheme in Stafford to provide 35 new affordable properties."
Stafford borough councillor Jeremy Pert, cabinet member for communities, added: "Stafford is forecasting a growth in population over the next few years and we need to build the housing in advance to cover this growth. This needs to be a balanced mix of housing for different family sizes."