The Government will invest $400,000 into social housing for low-income tenants in the Chatham Islands, Prime Minister John Key has announced.
The funding was expected to pay for five homes on the remote islands, where limited electricity supply and freight was pushing the cost of living to unsustainable levels for some residents.
Mr Key, who was visiting the Chathams for the first time, said: "We're prepared to put in more ... but this seemed to fit with the need they've roughly got.
"It's at least about five homes, so when you think $400,000 - you don't get too much in Auckland for $400,000."
There was no state housing on the island and a Housing New Zealand review in 2010 found 10 affordable rental units were required to house welfare-dependent or low-income islanders.
Asked whether the investment was well-targeted given the islands' various infrastructure problems, Mr Key said: "It is one of a number of things ...
but in the end you've still got to house people and they need capacity to raise those funds."
Residents have told the Prime Minister during his visit that the key industries of agriculture, tourism and fishing were hamstrung by the poor supply of energy and a degrading port.
He said the Government needed to carry out more research on energy options before decisions were made on whether to commit to new hydro, wind or tidal power schemes.
Two wind turbines were installed on the islands in 2010, but they have failed to reduce the cost of electricity, which was mostly diesel-powered and around four times the price of power on the mainland.
The biggest obstacles for getting cheaper goods to the islands were a corroding wharf and the lack of a breakwater, which meant ships could not berth in stormy weather.
Mr Key said the Government was keen to help at the port, but the community had asked it to "slow up a bit" while plans for phosphate mining near the islands was finalised.
Mining on the Chatham Rise, where surveys have found an estimated $1.3 billion in rock phosphate, could require an overhaul of the port to allow larger ships to berth.
The progress of the mining venture would also depend on its environmental impact - there was some concern that the tailings from dredging the seabed could negatively impact the region.