More than $500,000 in federal grant money is coming to the city and Tenants to Homeowners to build low-income rental units in east Lawrence.

A project to build five low-income rental units on vacant lots in the 1100 block of Rhode Island Street has been awarded $555,000 in Neighborhood Stabilization Program funding, Rebecca Buford, executive director of Lawrence-based Tenants to Homeowners, said Friday.

“With the economy the way it is right now, the need for affordable rental units is probably as big as the need for home ownership opportunities,” Buford said. “I know there are vacancies in the community, but the key is there has to be affordable units.”

Buford said construction work should begin in October on four two- or three-bedroom duplexes and one three-bedroom single-family home. The project will be on three vacant lots just south of an existing home at the southeast corner of 11th and Rhode Island streets.

The project is a partnership of the city, Douglas County and Tenants to Homeowners, which is a city-supported nonprofit group that builds affordable housing. Douglas County owns the three lots, just east of the Judicial and Law Enforcement Center.

Only families that are at least 50 percent below the federal median family income will be allowed to rent the units.

Buford said finding affordable housing for that income group has been particularly challenging in Lawrence.

“It is still around $500 to $600 for a lot of studio apartments in Lawrence,” Buford said. “If your income is $1,000 a month, how are you supposed to make that work?”

Scott McCullough, director of planning and development services for the city, said the lots already are zoned properly for the duplexes. He said the city is excited about moving ahead with the projects.

“This $500,000 of NSP funding helps the community address a recognized need for affordable housing, and we are anxious to put it to work,” McCullough said.

The need for the city to provide local matching funds for the grant is not expected, Buford said. Tenants to Homeowners has obtained a $50,000 grant from Federal Home Loan Bank of Topeka to take care of those costs.

The grants also will allow the city and Tenants to Homeowners to purchase and rehabilitate one or two homes that are in the foreclosure process. The homes then would be sold to low-to-moderate income families.

The city and Tenants to homeowners hope to have about $150,000 of grant money left over after building the rental units to devote to the foreclosure purchase program.