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It costs a lot to live by the canal in central Manchester, with even the pokiest of studios renting for £1,000. But in Embassy Village, the city’s newest waterside community, residents do not need to be rich. Quite the opposite, in fact. To live there, you have to be male, homeless and ready to get your life back on track.

Nestled between the River Irwell and the Bridgewater canal, just across from the fashionable Castlefield district, Embassy’s 40 studio flats have been built under two Victorian viaducts carrying the city’s trams and trains.

The land has been given for free on a 125-year lease by Peel Group, the developer behind MediaCity and the Trafford Centre.

Peel owns the canal as well, which means residents can fish and kayak when they are not taking part in sessions on budgeting, cooking and getting ready for work. Embassy, the Christian charity behind the village, describes it as “dress rehearsal” for life back in bricks and mortar, cutting out the middle man of the shelter for homeless people.

Chris, a 57-year-old former painter and decorator from the north-east, became Embassy’s first resident after spending most of his life on the streets “travelling from town to town with a tent”. When the Guardian visited, he was particularly enthused about the angling opportunities, hoping to beat his record of a 29lb carp.

He seemed overwhelmed to have his own front door for the first time in years, and a view of the canal. “I’m very lucky,” he said, as he marvelled at the pristine white walls of his new home, his private wet room and his small but high-spec German kitchen, kitted out with Bosch appliances.

“We want residents to feel like: ‘Wow, I’ve landed on my feet – I’m going to take this opportunity,’” said Embassy’s indefatigable founder, Sid Williams, whose first foray into helping homeless people involved turning Mumford & Sons’ tour bus into a mobile shelter.

Williams, a former youth worker, wants residents to feel important and valued. “In God’s upside down economy, the last, the poor, the least – in this world’s eyes – are his VIPs. That’s who Jesus wanted to spend his time with.

“And we were like, wouldn’t it be great to take that literally? So that’s why we got a VIP tour bus that had been touring Tinie Tempah and Coldplay and had a deeply inappropriate champagne fridge on it.”

As on the tour bus, drugs and alcohol are banned at Embassy, and no visitors are allowed. But it was a common misconception that most homeless people were addicts, said Williams, noting that about 60% of people were made homeless after a relationship breakdown.

More and more “average Joes” were ending up on the streets, he said. When he started working in the sector in 2004, many people were “institutionalised, coming out of the care system, the armed forces, prison and shelters … Whereas now, we find there’s about 300% to 400% on top, just your average Joes: people who just can’t quite make ends meet any more”.

Those not in work are helped to apply for housing benefit – about £625 a month for a single man in Manchester, which covers Embassy’s rent and a few costs.

“This is like a dress rehearsal at managing a home, managing your finances and holding a job down,” said Williams. “Granted, there’s a lot of hand-holding here. We have one full-time support worker to every six residents, which is basically unheard of.”

Preparing residents for life outside Embassy was crucial, said Tim Heatley, a co-founder of Manchester developer Capital & Centric, who was in charge of raising the money for Embassy Village as chair of the Greater Manchester’s Mayor’s Charity. “Helping them to clean, cook, budget, get a job, keep a job. If we don’t get that right, then it will have failed.”

He wants residents to be comfortable, but not so much that they don’t want to leave: “I think we need to quickly move people from here on to their own accommodation – somewhere else that’s not state-supported – so that they can continue then to rebuild and go on and not be reliant on the state.”

In Manchester, where 1 in 61 people are homeless, the social housing waiting list is 15 years for able-bodied men. “No chance, basically,” said Williams. At Embassy’s other projects in Greater Manchester, residents stay for an average of 14 months before going into private rentals. “Between 92% and 95% of residents leave us with a full-time job, no long-run benefits, going to private rental. So we’re unburdening the council housing waiting list in the process.”

For Bev Craig, Manchester city council’s leader, Embassy Village is a cheering sign that “good people can do good things”. The council will refer homeless people to Embassy because she likes the emphasis on community-building. “When we talk to people that find themselves on the streets, it’s a failure of mental health services, it’s failure of tackling addiction, and it’s the failure of not being able to deal with loneliness,” she said. She hopes Embassy will “treat those individuals like they’re part of a community, help them develop, and teach them what it means to be in safe and sustainable accommodation”.

The village is designed to encourage as much social interaction as possible, such as at weekly “family dinners” cooked by staff. A sports pitch and boxing gym are under construction, as is a joinery studio run by Oli Green, who crafted some of the fanciest kitchens in Cheshire before pivoting to work with homeless people.

The £6.2m build has been funded by the Moulding Foundation and the Greater Manchester Combined Authority, as well as an extraordinary 130-strong coalition of local businesses working either for nothing or for zero profit – many of whom are also offering jobs and training to residents. But Williams is permanently fundraising to cover the costs of six staff members.

James Whittaker, Peel’s managing director, sees the Manchester Embassy Village as the first of many. “We’re not stopping here,” he said. “We can copy this in every city in every town throughout the UK.”