The commitment by Loddon Mallee Housing Services has been kick-started by a deal in which the city council will give 13 properties to the Bendigo-based not-for-profit association.

Yesterday, the association said the land ownership transfer would give it the financial leverage to build a further 28 high-quality new units and houses in the city, at an estimated cost of $7.9 million.

Construction is expected to generate about 20 jobs during the next two years and support another 20 jobs in the region.

Councillors last night unanimously agreed to transfer ownership of the land in Merrivale and west Warrnambool, which had been leased out for more than 30 years under a deal with the Office of Housing.

According to a report aired at last night's meeting, the properties have a capital improved value of $2.2 million and a site value of $1.3 million. However, the ageing rental houses were due for substantial renovation.

Although the council will lose regular rental income it will gain new rates revenue.

Mayor Cr Michael Neoh said the deal was a ``best case scenario'' to exit the properties.

``We had to consider if owning rental houses is a core council strategy,'' he said.

``Now the transfer of ownership will give the association leverage to increase rental housing stocks.''

Cr Jacinta Ermacora said the arrangement would help fulfil the council's commitment under its new four-year strategy to provide affordable housing.

``It's a win-win for the city,'' she said.

Loddon Mallee Housing Services already manages seven rental properties in Warrnambool and more than 440 in other parts of the state.

Last month it announced a $10 million expansion in Geelong and it has plans to expand into other areas.

Loddon Mallee's deputy chief executive Trudi McClure described the city council deal as ``an exciting initiative''.

She said the new Warrnambool properties would be a mixture of two and three bedroom units and houses scattered around the city.

The deal was first mooted in 2004 when the city council shared its desire to ease the shortage of affordable rental housing.