The council-owned land in an area between Kirkwood Rd and Mitchell Place/Boston Cres had been earmarked for development since the 1980s.
It adjoined land owned by TTOH, which had put forward the proposal to build quality conventional housing and a state-of-the-art co-housing village.
The council would now sell its land to TTOH at a commercial, independently valued price, and TTOH would build the houses - 44 conventional homes and 76 one to three-bedroom homes in the co-housing area.
The conventional houses would be subject to the same covenants as the neighbouring privately developed sections to ensure the quality of the new homes remained the same as the existing ones, Mrs Hazlehurst said.
TTOH chairman Mike Paku said the development would be life-changing for many residents.
"The project will make a real difference to many people."
His thoughts were echoed by TTOH chief executive officer George Reedy, who said TTOH would support families into home ownership.
"A family would put forward a deposit, topped up by a shared equity investment from Te Taiwhenua, which would enable it to spend up to $375,000 on a home.
"This gives families on one income or two lower incomes a very real opportunity to buy their own quality home. It may be a two or three bedroom in the co-housing village for between $205,000 and $260,000, or a three bedroom standalone house for $375,000," he said.
"We believe that a well-mixed community, with young families, the elderly and everyone in between, will develop into a very important sector of Flaxmere, and wider Hastings."
Mrs Hazlehurst said the development plans were impressive.
"The co-housing area is medium density. We are very impressed with the balance and mix of space in the co-housing area, allowing for community togetherness as well as private family space."
Now that it had been approved, the next steps in the process would include the normal resource consent and planning processes.
Since its inception in 1987, TTOH had helped tens of thousands of people in the community and grown into an employer of 300 staff.
Since 1987, TTOH had grown into an employer of 300 staff, and by 2017 its annual revenue reached $20 million, and it held 100 contracts.
It ran a medical and dental facility, mental health and addiction services, social services, educational courses and housing projects.