Edmonton has announced a $200-a-month rent subsidy aimed at making housing more affordable for the working poor.

The city's overheated economy has sent rents soaring while vacancy rates are falling.

On Tuesday, the city, province, and Canada Mortgage and Housing Corporation announced they had set aside $5 million to spend over the next five years on subsidizing 400 existing rental units.

Hope Hunter, who works with the homeless and working poor in Edmonton through Boyle Street Community Services, called the program a good first step.

"We have people in the river valley who are camping who are working," she said.

"The difficulty is they don't have an address, so they can't even begin to improve their circumstances."

Clayton O'Brian is among those sleeping in a tent in the city's river valley.

"I think it would make a huge difference," he said. "The apartments we're looking at are, say, around $600 per month and at $200, that's a third of the rent right there."

Tuesday's announcement is part of what's called the Cornerstones Plan, fulfilling  a promise Mayor Stephen Mandel made during the election campaign two years ago to create more affordable housing for Edmonton's working poor.

"This is the tip of the iceberg, we need to do a heck of a lot more," he said.

Edmonton's apartment vacancy rate fell from 4.5 per cent to 1.5 per cent in the first six months of 2006.

And after years of stability, rents have taken a 13 per cent jump. The average one-bedroom rented for about $650 a month in July.