The project will see 32 affordable homes to rent and buy delivered in the Western Isles' town.
It is part of wider plans to build 61 homes across the Western Isles by summer 2015, with almost £4m support from the Scottish Government.
This development, located at Melbost Farm in Stornoway, has been part funded through a £1.8m grant from the government and will consist of 16 homes for affordable rent, plus 16 shared equity homes to buy, under the low cost initiatives for first time buyers (LIFT) programme.
The investment comes as part of a housing development programme agreed between the Scottish Government, Comhairle Nan Eilean Siar and the Hebridean Housing Partnership.
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Visiting the site on Wednesday, Deputy First Minister Nicola Sturgeon said: "I am delighted to announce the start of work on this new development at Melbost Farm, which will see the construction of 32 new homes to rent or buy at affordable rates.
"This comes as part of a package of support worth nearly £4 million that will see 61 new affordable homes built across the Western Isles by the summer of 2015.
"In addition, we have provided over £500,000 in funding to purchase land in Lewis and Harris for future development, ensuring a supply of land to meet local housing needs in the years to come.
"Increasing the supply of affordable housing is a vital part of our efforts to build a better and fairer Scotland, and the Scottish Government is doing everything possible to deliver on our target of 30,000 new affordable homes over the lifetime of this Parliament, at least 20,000 of which will be for social rent."
Calum Mackay, Director of local building firm Calmax Construction, added: "The partnership Calmax has with HHP to construct affordable houses is working well.
"Following considerable consultation with the community during the planning process we are sure that the development will both enhance housing opportunities and be positive for the local environment."
(JP/MH)
