Homeless veterans and those with mental-health problems will find a new home in Tioga next year when the city completes a $10.5 million renovation of a 54-unit apartment building.

Project HOME, a nonprofit group dedicated to helping the homeless, will develop the building at 2101 W. Venango St.

Mayor Nutter said the new housing would address a major national problem - the large number of homeless people who once served in the military. Some research puts that figure at 25 percent of the homeless population, Nutter said.

"This, of course, is a national disgrace that those who served their country well have not been served well," Nutter said at a news conference Wednesday announcing the renovated apartments.

Terry Gillen, executive director of Philadelphia's Redevelopment Authority, which provided financing to help Project HOME acquire the property, said $9.2 million of the money came from federal stimulus funding. Project HOME will fund the rest, using part of a $1.1 million donation from Leigh and John Middleton, part-owners of the Phillies.

Project HOME founder Sister Mary Scullion donned a Red Phillies cap as she discussed plans for the renovated building.

Residents will have access to her organization's medical-care services, including immunizations, education, fitness classes, and home visits, she said.

Construction will begin in spring 2011 and take about seven months. Fifteen units will be set aside for homeless veterans, 25 for adults with a history of homelessness who are successfully managing a mental illness or substance-abuse problem, and 14 for low-income applicants.

"Even in economic hard times, Mayor Nutter has made and maintains a commitment to those in need," Scullion said.

City Councilwoman Donna Reed Miller, whose district includes Tioga, said the new building had special meaning for her because her brother died in Vietnam.

The building had been a neighborhood nuisance, with the kind of tenants who attracted frequent police visits, she said.

Contact staff writer Miriam Hill at 215-854-5520 or hillmb@phillynews.com.