Watch: Green light for Wellington Kainga Ora project at one third of original size

A Kainga Ora housing development in Wellington which has been in limbo for years is going ahead - at a third of the size originally planned.

Housing Minister Chris Bishop and mayor Andrew Little visited the site on Thursday morning, and announced that the Arlington project in Mount Cook would go ahead.

While previous plans included more than 300 units, construction will start next year on 104 units.

In exchange for the scaled-down project, the government will provide a grant of $6 million to Wellington City Council for distribution through its community grants programme to support housing services.

Little said the housing development was needed.

"That's got to be a positive when we're seeing rough sleepers and homelessness a major problem for the city."

The units will be made up of 55 one-bedroom, 37 two-bedroom, and 12 four-bedroom units.

The land will have one seven-storey building for one-bedroom and two-bedroom units, with the four-bedroom units in a terrace formation.

Bishop said construction would start at the site next year, and would be completed by 2029.

The minister said the Arlington development in Wellington's Mt Cook suburb had been paused by the previous Labour government due to the cost.

Costs had blown out on a plan for 301 apartments from $296 million budgeted in 2021 to $419m, he said.

Kainga Ora was unable to release the estimated cost of the new development due to commercial reasons.

With half of the site now going unused, Little said the council's own social housing provider, Te Toi Mahana, will look at what it could do.

"This is a challenging site, [which is] one of the reasons why the costs blew out."

Bishop said Kainga Ora will go to market for building contractors.

"KO and I want to get good value for money, but it will be substantially cheaper than what was... not approved in July 2023."