Two housing projects in Winnipeg's core area will be the first beneficiaries of a provincial housing fund created by the profits of suburban housing developments, provincial officials said Thursday.

The first $1 million from the Housing Development Rehabilitation Fund, established by legislation earlier this month, will help fund inner-city housing developments on Portage Avenue and Donald Street.

"It's a way of distributing the benefit of suburban development," said Housing Minister Gord Mackintosh, who characterized the funding as a "seed-planting."

"You can have brand new communities and at the same time you can strengthen the older communities. It's just a great exercise in a balanced housing strategy, we believe."

North Portage Development Corp. will get $500,000 to turn four floors of vacant space in the Canada Building at 352 Donald St. into 60 moderate income rental units and retail space after $6.4 million in renovations are complete.

"They're young people, generally," said North Portage spokesman Jim August.

"They're interested in a nice living environment, but they can only afford so much. So we think this will really help."

The University of Winnipeg Community Renewal Corp. will receive the other $500,000 to help build a 178-unit housing complex at Portage Avenue and Langside Street.

"We really … want to develop a village concept, where there's some retail and there will be housing and kids in daycare," said U of W president Lloyd Axworthy.

The $9-million mixed housing facility, which will include both dormitory-style residences and townhouse family homes, would be open to both U of W students and students at other educational institutions.

Mackintosh expects the fund will grow to more than $14 million over the next four years through profits from the Royalwood development in St. Vital and future development in the new Waverley West subdivision.