For nearly half a century, the view south from the corner of Essex and Delancey Streets has been of vacant parking lots behind chain-link fences, carving a desolate hole in the otherwise vibrant neighborhood. But this month, construction finally began on a $1 billion redevelopment project that will reshape the Lower East Side.

With financing secured, developers can now begin work on Essex Crossing, a 1.65 million-square-foot project that will eventually add 1,000 units of housing to the area, half of which will be permanently affordable. The first development phase will deliver 556 mixed-income units, a new home for the historic Essex Street Market, a movie theater, a bowling alley, a museum and a new shopping corridor along Broome Street.

“The whole neighborhood is going to be completely different,” said Gigi Li, the chairwoman of Community Board 3.

The community and the city spent years hammering out an agreement for the site, finally reaching one in 2013, settling a bitter dispute that started when the area was bulldozed in 1967, displacing nearly 2,000 residents in the name of urban renewal. Over the years, various attempts to redevelop the site, known as the Seward Park Urban Renewal Area, fizzled as vying neighborhood factions sparred over how it should be rebuilt, with some groups calling for only affordable housing and others demanding none. The final agreement provides a mix of retail, housing, offices, a park and space for a new public school. In September 2013, the city chose Delancey Street Associates, an umbrella group of three separate developers, to rebuild the site now called Essex Crossing. “You have this important population that is just cut off from the rest of the Lower East Side by the size and scale of those parking lots — this just reconnects the fabric,” said Margaret Anadu, a managing director in the Goldman Sachs Urban Investment Group, which is the project’s equity partner, investing $200 million in the development.