Housing New Zealand has reduced the timeframe for dealing with more than 5500 state homes damaged in the Canterbury earthquake after the approval of a $320 million insurance payout.
Housing Minister Nick Smith said the repair and redevelopment programme would be cut to three years from five.
More one and two-bedroom units and fewer three bedroom homes would be built. The houses would be mixed with existing communities rather than built in concentrated estates, Mr Smith said.
"The negotiations were complex and challenging. They took several months to complete and involved not only our lead New Zealand insurer Vero, but other New Zealand co-insurers, London insurers and Lloyds of London and Insurance Broker Aon."
Mr Smith said he was concerned the claim would have involved years of litigation.
"I congratulate all parties involved for working to achieve this pragmatic and fair settlement."