Pismo Beach’s first low-income housing project — which will include 14 units built specifically for those who meet certain income levels — should be finished within three years.

The City Council and the Pismo Beach Redevelopment Agency on Tuesday approved a development agreement with San Luis Obispo-based Peoples’ Self-Help Housing, which is to design, construct and manage the estimated $4.3 million project at 360 Park Ave., near Ira Lease Park.

Both the council and Redevelopment Agency board — which is composed of council members acting as a legally separate entity — voted 4-1 to move ahead with the project. Councilman Ted Ehring dissented on both separate votes.

“It’s very, very much needed,” said Scott Smith, deputy director with Peoples’ Self-Help Housing. “It will be a permanently affordable, permanent housing resource for the community of Pismo Beach.”

The council also agreed to loan the nonprofit organization $1.6 million to assist with the project’s development and will waive $41,915 in planning and building fees. Funds for the loan come out of money the city requires developers to pay if they don’t include low-income homes in their developments.

Peoples’ Self-Help Housing operates 1,300 housing units in San Luis Obispo, Santa Barbara and Ventura counties.

The city bought the 26,620-square-foot parcel on Park Avenue for a little more than $1 million with money from its Redevelopment Agency, which is required to set aside at least 20 percent of its money for low- and moderate-income housing.

“This land was purchased with money intended to provide low- to moderate-income housing,” Pismo Mayor Shelly Higginbotham said. “This is our best opportunity to finally get something out there and utilize these monies finally. I think it’s great for the city, and long overdue.”

The agreement approved Tuesday allows Peoples’ Self-Help Housing to purchase the property from the city with a no interest, 55-year loan.

The organization intends to apply for federal low-income housing tax credits to help fund the project; the deadline for the organization to apply is March 23.

The income target for residents of the project would be those making 30 to 50 percent of the area median income, said Jon Biggs, Pismo Beach’s community development director.

According to the county’s Department of Planning and Building, the median income for a family of four is $72,500; a very low-income family of four earns $36,250 and an extremely low-income family brings home $21,750.

The project is being designed to “green,” energy-efficient standards and will include five three-bedroom units, five two-bedroom units and four one-bedroom units, Smith said. Priority for the units would be given to people working or already living in Pismo Beach.