Three housing units will be built in Raglan St after council formally finalised the details of a plan with the Disability Housing Trust.

There is currently no supported housing available within the municipality and all supported residential services, which were home to many people with disabilities, have closed.

Hepburn Shire mayor Janine Booth said the agreement was a first for any council in Victoria.

"The availability and affordability of housing has been an issue in Hepburn Shire, particularly in Daylesford and Hepburn Springs," she said.

"The specific housing needs of people with disabilities are of particular concern as there is no supported housing available within the municipality and all supported residential services, which were home to many people with disabilities, have closed.

"Council undertook a range of consultation processes in developing this project, including site meetings with adjoining owners, the planning permit process and finally the statutory advertising for transfer of the land.

"We are very excited to see this work coming to fruition to provide this much-needed housing in our shire."

The project will see the construction of two single-bedroom units and one two-bedroom unit, accommodating a minimum of three people.

In 2006, council successfully submitted an expression of interest for innovative housing to the Disability Housing Trust.

In the EOI, council agreed to provide land for construction of units by the Disability Housing Trust.

In 2008, an area of land on Raglan St, Daylesford was identified as suitable for the project and a public notice published late last year received no objections from the community.

At their council meeting last Tuesday night, council formally transferred the parcel of land at 79A Raglan St, Daylesford to Disability Housing Limited.

The land is valued at $130,000 and was transferred to DHL effectively without cost as council's contribution toward the project.

Council has also allocated $12,000 from the current budget to cover subdivision, transfer and agreement costs associated with this project.