The project, which will see more than a dozen unoccupied premises along Winbourne Street demolished to make way for eight two-bedroom units that are newer and more energy-efficient, has been in the works for a number of years and is expected to be completed by early 2023.

The existing tenants, of which there are only a handful, will be offered relocation to one of ten homes already built across town on Saleyards Lane by Housing Plus.

One resident, Lynette Pumpa who has lived on Winbourne Street for six months is excited to be moving into a brand new home, a far cry from her ageing unit she lives in now.

"I'm just so excited, I can't wait," she said.

"All I'm waiting for now is the date and then I can start packing. I'll have a good new year because I'm moving into a new house.

"I'm thinking myself there should be more homes for people that really do need them. [The homes], they just look like an eyesore at the moment."

Chief Executive of Housing Plus, David Fisher said the new homes will lift the outlook of the area.

"I just think it's going to be great improvement for the neighbourhood - and much needed additional accommodation for Mudgee," he said.

"At the moment these bedsits don't meet anybody's needs... Four of the properties at the moment are occupied, the rest aren't. We will expect all eight to be occupied. So there will be four other families who currently haven't got appropriate accommodation that will find that here.

"I think beyond meeting those who are looking for housing needs, I think it will also lift this corner of Winbourne Street - lift the outlook of it. And I think that will add to the overall community and neighbourhood."

Brad Cam in his role as Chair of the Board at Housing Plus said he's glad the project is finally making strides.

"We've had our eye on this site now for probably five years as a really great potential for some - social housing and it's been sitting here empty for such a long time," he said.

"We have been working with the department for a number of years to try to show them some ideas of what we were proposing to do. And I'm very pleased today that they've agreed and are going to give us some funding to be able to actually redevelop this site that is really needed in the Midwest region.

"There's a lot of pressure on rental, a lot of pressure on people trying to get some form of affordable housing and social housing."

Member for Dubbo, Dugald Saunders said the partnership with Housing Plus and the NSW Government aims to make up some of the difference when it comes to social housing for those that desperately need it.

"Along with the construction of the $3 million development, Housing Plus will provide tenancy management and maintenance services for the new residents for at least the next 20 years, under a long-term lease," he said.

"The construction will reinvigorate the economy, create jobs and deliver safe and comfortable homes to the areas that need it most.

"There's need for one, two and three bedroom social housing, there's no doubt about that. But there is not much three bedroom housing in Mudgee. So this is really going to plug a gap very quickly."

Those seeking housing can apply through the Pathways Register or the Housing Plus office in Mudgee will also be able to provide advice in the future.

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