Construction has begun on the second phase of the redevelopment of the Old Colony public housing development in South Boston.

"Redeveloping Old Colony creates jobs and green affordable housing," Boston Mayor Thomas Menino said in a statement. "In these tough economic times, a project like this is a boon to our residents and those in the building trades."

Old Colony Phase Two includes the demolition of the remaining 223 units along Old Colony Avenue up to Dorchester Street and over to Reverend Burke Street. Following demolition, 169 new affordable rental units in townhouse-style buildings and four-story elevator buildings will be built.

The public/private partnership to redevelop the site includes funding from a combination of a $22 million federal grant from the U.S. Department of Housing and Urban Development, $1 million investment from the Boston Neighborhood Housing Trust, $3.5 million in state bond funds and an allocation of low income housing tax credits from the commonwealth, construction financing provided by MassHousing and state and federal Low-Income Housing Tax Credit equity provided by U.S. Bank through its community investment subsidiary.

Beacon Communities is the developer of Phase Two. Construction is expected to finish in May 2014.