The City of Vancouver unveiled a plan Tuesday that would see taxpayers shell out an additional $32 million for affordable housing at the Olympic village and encourage key public service workers to rent there.

The city said it would stick to its original plans for affordable housing at the site, splitting it between low-income and those able to pay market-rate rents.

According to a staff report released Tuesday and endorsed by Mayor Gregor Robertson, the city would encourage police officers, firefighters, nurses and other public service employees to move into the market-rate units, which would cost $1,600 to $2,400 per month.

Those rents, along with the new $32-million subsidy from city coffers, would pay for the low-income units.

Many details of the proposal, which goes to city council for a decision Thursday, have not yet been worked out, including how people would be chosen for the market-rate units.

The plan arose as the city struggled to meet its promise to build 252 units of affordable housing in the Olympic village in the wake of massive cost increases as the project was being built.

Without the proposal, the city wouldn't have been able to stick to its promise of providing 20 per cent affordable housing in the 1,108-unit neighbourhood.

The city even considered selling the units at market rates and using the money to build social housing elsewhere.

Housing activists charged the plan is a betrayal of a promise to the International Olympic Committee that all of the units would be used for "non-market housing."

Laura Stannard, a spokeswoman for Citywide Affordable Housing, said allowing half the units to be rented at full market rental rates of up to $2,398 per month doesn't constitute affordable housing.

She expected that all 252 units would go to housing people who have no prospect of paying market rents.

"The definition of non-market housing is that it requires a subsidy. If you are renting out units at market rates, that's not a subsidy and that isn't non-market," she said.

Robertson, however, said the city has always endorsed a mixed-income program for affordable housing across the city and that it had never considered devoting all the units to "core need" housing for the poor.

That view was backed up by city staff who said council policies dictate that affordable housing units are to be a mixture of market rental, low-income and core-need housing with rents at below market rates.

Robertson also said a staff recommendation to give the market-rate rentals to police, fire and health and local employees is "intriguing." He said many are forced to live outside the city because they can't find affordable housing.

Some councillors said they wanted more social housing.

Councillor Ellen Woodsworth said she always believed all of the units should be used for housing the needy. "We are in the midst of the worst homelessness crisis in the city's history and we should be using these units to help solve that," she said.

But Councillor Kerry Jang said he supports the idea of targeting the higher-end units toward public safety employees.

Recent figures suggest just 10 per cent of the city's firefighters and police can afford to live within city boundaries. By offering them preferred rental housing, more will be available in the case of disaster response, he said.

The social housing units are part of the financially troubled Millennium Water development on the south shore of False Creek, of which the vast majority are strata-title condominiums. A total of 737 are private for-sale units. Millennium is also providing 129 rental units, although these are separate from the city's proposed 126 market rent apartments.

The city is also the financial backer of the Millennium project and is owed about $969 million. It expects to get that money back, with interest, as Millennium sells its condominiums for a profit.

The entire project was hit by a combination of problems, including a hot construction market, an expedited time frame for the Olympics and the worldwide economic collapse in 2008.

The proposal going to council suggests taking $32.1 million from various city sources to help bridge a $78-million gap between the $110-million cost of the affordable housing program and the $32-million it has in hand from the Vancouver Organizing Committee and special levies.

The additional funds would allow the city to take out a $45.9-million mortgage, which would be paid down through the market-rate rents.

The city hopes to negotiate a funding agreement with the B.C. Housing Ministry for the low-income renters.

Council will debate the proposal on Thursday.

In a report issued at a background briefing Tuesday, staff said they are recommending the option that would see market rental rates of between $1,601 for a one-bedroom unit and $2,368 for a four-bedroom unit per month. At the other end of the spectrum, core-needy rents would be $612 to $962 per month. The market rents would be structured to cover a $45.9 million mortgage.

The proposed deal is similar to other mixed-income housing initiatives the city has elsewhere, including the south side of False Creek between the Cambie and Granville bridges.

The city says the cash injection in the city's equity in the social housing component would be taken from a number of existing city sources, including just under half from savings found in current and future capital plan budgets.