The project will include 36 new council homes with a further 109 homes for private sale. Kier will develop the sites and build the council homes under licence – they will then be added to Sandwell's council housing stock.
Funding to build the council homes has come from the council's housing revenue account and receipts from council properties that have been sold under Right to Buy.
The new council homes for rent will be built first with work expected to start in the New Year and scheduled for completion in 2016. The private properties are scheduled to come on the market from 2016 to 2018.
The deal will also create a number of construction training places and construction jobs for local people.
Councillor Ian Jones, cabinet member for jobs and economy, said: "The demand for housing continues to grow in Sandwell. Working with Kier Partnership Homes, as our development partner on these sites means that we are able to replace some of the homes that we have lost from our own stock through Right to Buy. There will also be a number of homes for private sale as well."