Building work has started on the former Arcade site as construction workers dig the foundations for a new cinema, shops and housing complex.

The development on the corner of High Street and Hoe Street, Walthamstow is set to be called The Scene at Cleveland Place, and will feature an Empire cinema, 121 new homes available to rent and also being offered under shared-ownership, as well as shops and restaurants.

Waltham Forest Council hopes the scheme will help revitalise the area after several failed attempts to develop the site, which has remained empty for a decade.

The authority, which owns the freehold on the site, is funding the development by borrowing large sums of money on the basis of its expected rental income, but no companies have yet signed deals to occupy any of the shops.

It has declined to disclose the amount it must borrow to fund the development, but Conservative councillors believe it could equate to £450,000 a year.

The council stepped in when fears emerged that developer Islington and Shoreditch Housing Association (ISHA) was struggling to find tenants for retail units which were supposed to generate enough revenue to cover the cost of the lease.

The authority offered to sell ISHA the freehold and take on most of the lease costs to prevent the development collapsing before Tory councillors criticised the strategy for exposing taxpayers to too much risk.

The council would have been committed to paying £623,000 a year for 130 years even if the rent never came in, though if every unit was let it would have made up to £150,000 profit a year.

The Guardian has asked how long building is expected to continue.