The redevelopment of the former Bay department store will include a $32-million apartment building, providing 120 units of affordable housing.

Some of the units will be owned and some will be rentals.

The announcement was made Monday by Rich Coleman, Minister of Housing and Social Development.

"We recognize the significant changes in the housing market and the increased need for affordable housing," said Coleman in a news release.

"Hudson Mews will offer an innovative approach by providing affordable rental housing and homeownership for moderate-income earners."

The Province is seeking a non-profit housing provider to own and administer the rental units and oversee the sale of the other units.

The City of Victoria will contribute an $800,000 grant to the project from the Victoria Housing fund.

"This project is a unique opportunity to bring more rental housing to the city and investment in our downtown community," said Victoria mayor Dean Fortin in a written release.

Construction to start next year.

Townline is selling the land to the province for 80 per cent of market value.

Updates to come.