Eildon Housing Association won the contract to build 16 homes at the Dunwhinny Lodge care home on the south side of the Tweeddale town.
The move follows councillors’ support of the application at a planning committee meeting.
Some councillors argued for a delay in the development until the town decided where its new bridge would be built.
But Peeblesshire councillor Catriona Bhatia said: "The bridge issue is not significant as far as I am concerned and the latest transport study report which has just been published includes research which says capacity will not be reached until 2020.
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"I don’t think there will be traffic difficulties to be honest, but it is good news that a condition has been attached to consider parking restrictions at Glen Road and Kingsmuir Drive. The most important thing is this development will provide much-needed affordable homes for Peebles."
Fellow Peeblesshire West councillor Nathaniel Buckingham added: "I was a little disappointed that the Dunwhinny Lodge building could not be retained or reused, but an options appraisal was undertaken which demonstrated that for affordable housing only a new build scheme was viable.
"The developer has responded well to some of the initial design concerns and created a development that will be attractive to live in and retains public pedestrian access through the development."
Eildon’s chief executive Nile Istephan, said: "As part of this approval we understand that the council have been asked by the committee to undertake a traffic impact assessment related to this development.
"This is further to transport impact study that we have already undertaken in preparing our application and we are confident that this will verify that transport flows are projected to be broadly in line with those experienced from the current use of the site."
The Dunwhinny Lodge scheme is expected to be completed by summer 2014.
(IT)
