Up to 1200 new homes in the Auckland suburb of Northcote will be developed over the next five years in a $750 million government plan to help address a housing shortage.
Under the plan announced on Friday, 300 Housing New Zealand properties will be replaced by 400 new properties and up to 800 other homes will also be built - a mix of affordable and market housing.
The first homes will be completed in June 2017 and the entire redevelopment is expected to be completed by 2021.
The announcement comes as the government faces intense criticism from opposition parties over the housing shortage - particularly in Auckland - and the plight of homeless people.
It has been accused of selling state houses while families live in cars and leaving hundreds empty when they could be used.
Finance Minister Bill English, who is responsible for Housing NZ, says the development involves 300 to 400 HNZ homes and a further 600 to 800 properties that will be sold as a mix of affordable and market housing.
The Hobsonville Land Company (HLC), a wholly-owned HNZ subsidiary, will do the work.
"Northcote is the latest example of the government's work to develop its own land to accelerate the supply of new houses into the Auckland market," Mr English said.
Building and Housing Minister Nick Smith says HLC has a proven ability to deliver large-scale projects through trusted commercial partners.
"This significant development is consistent with our broader plan for addressing Auckland's housing supply and affordability challenges," he said.
