A new funding model to create 350 affordable rental accommodation units by the end of 2021 has been announced.

They are known as "cost rental" homes because the rent is used to cover the cost of construction over the lifetime of the building loan.

Minister for Housing Darragh O'Brien says Approved Housing Bodies (AHB) will receive €35 million to provide cheaper rental units to people who earn too much to qualify for social housing.

The long-awaited cost rental scheme will mean letting units out for at least 25% below market rate which could be around €1,500 for a two-bed in some parts of Dublin.

Housing organisations such as Clúid, Respond and Tuath will be able to purchase houses or apartments in blocks of at least 20 units.

The Government will be giving a total of €35 million in long-term lending for up to 30% of the purchase price as part of the Cost Rental Equity Loan (CREL) scheme.

These CREL loans will be low interest and not due for repayment for 40 years. The Housing Finance Agency will have another €100 million to lend on a long-term basis.

Minister O'Brien said he is issuing a "call for proposals" from AHBs.

"Approved Housing Bodies have consistently demonstrated their capacity and expertise in developing and managing homes for the social housing sector," he said.

"This new scheme provides for an expanded role for the AHB sector, enabling it to support moderate-income households in need of quality, affordable homes."

It is hoped to have applications approved by the end of next month and the housing bodies will have to show that the units have not already been proposed for social housing or been let in the private market.

The housing bodies will also have to undertake to manage and maintain the properties.

The 350 homes will be in addition to the 50 cost rental units being built at Enniskerry Road near Stepaside, Co Dublin where a two bed home is expected to cost around €1,200 a month.

Another 400 cost rental apartments are expected to be built at St Michael's Estate in Inchicore in Dublin's south inner city are currently being priced at €1,300 a month.

However council official and local representatives hope that increased grants under the Serviced Site Fund and cheaper finance terms could reduce the cost to as little as €900 a month.