Initial site works are taking place at the former St Kevin's Hospital Site in Sunday's Well.
265 new social and affordable homes will be built on the 14 acre site, with the first homes due to become available in 2024.
The Land Development Agency says the works will take a few months and include building a secure boundary around the site and the demolition of non-protected buildings.
The development will include a mixture of one to four bedroom townhouses, duplexes and apartments.
