Gov. M. Jodi Rell announced Monday that the state will provide $2.1 million in financial assistance for an affordable housing project at the Mill Apartments in New Canaan.

"Affordable housing is a priority everywhere in Connecticut -- and that is especially true in Fairfield County, where the cost of living is very high," Rell said in a statement. "This project will help the Mill Apartments replace the existing 16 units and add 24 new ones, more than doubling the amount of affordable housing offered there. Equally as important, the demolition and construction will mean keeping and growing jobs at a time when our economy continues to struggle with the effects of the national recession.

"This project is a great example of how we can use federal programs to partner with municipalities and refurbish an aging housing complex, assist families in need and help communities maintain their quality of life."

The Mill Apartments complex was built in 1950 and consists of eight one- and two-story buildings. The New Canaan Housing Authority, which owns the apartments, will receive a low-interest loan to demolish and replace the existing buildings and add 24 new units. The total cost estimate for the project is $7.8 million.

"This has been at the top of my priority list for many years and I'm ecstatic to get this," First Selectmen Jeb Walker said.

According to New Canaan Housing Authority Chairman Charles Berman, financing for the development is coming from three different outlets: proceeds from The Bank of New Canaan, the sale of tax credits from Peoples' United Bank and the newly committed funds from the HOME Investment Partnership Program.

The HOME program, administered by the Department of Economic and Community Development, is a federally funded program offering grants, loans, and deferred loans to non-profit and for-profit developers, housing authorities and individuals to develop and support affordable housing.

At the start of the new year, the housing authority will begin the process of converting commitments from the three donor groups into cash, Berman said.

"We're excited," Berman said. "It's been years of effort by an enormous number of people. It was very nice of them given the economic climate to find a pocket of money to give toward this."

Under state law, every Connecticut municipality makeup must include 10 percent affordable housing. New Canaan has about 8 percent, Walker said, and this development will inch the town closer to compliance with that mandate.

"There are still a few more i's to dot and t's to cross, but we're almost there," said Walker, who projects that construction could start as early as mid-February.