The City of Lincoln Council will build 20 new homes in the Birchwood estate.
The properties will be the next phase of a programme to build 150 new council homes in Lincoln within six years.
This will be the first development since the Executive Committee agreed to earmark £15 million to accelerate the Municipal House Building Programme last month.
The project comprises five smaller schemes, building a total of 20 two-bedroom bungalows on under-used garage sites and parking areas in Birchwood.
Each site would contain between three to five bungalows, aimed at older people and the disabled.
The whole scheme is estimated to cost around £2 million.
John Bibby, Director of Housing and Community Services, said: “We have identified a number of potential sites for much-needed housing in Birchwood, all of which are owned by the council, so there is no purchase cost.
“Executive members agreed the next phase of our house building programme should focus on developing schemes to provide bungalows for older people and people with disabilities.
“We are proposing building these properties to high energy performance standards, to help keep down residents’ energy bills and to help reduce the city’s carbon footprint.
“Local residents will be consulted on the proposals and we will begin consultations with tenants of any occupied garages regarding the possibility of relocation to other garage sites in the area.”