The Government is handing over the ownership of about 2800 Tamaki state homes to the Tamaki Redevelopment Company (TRC).
The decision, announced this morning, means all Housing New Zealand tenants living in the TRC catchment areas of Glen Innes, Pt England and Panmure would have a new landlord by March 31 next year.
Existing tenancy agreements will transfer to TRC with no change.
It will encourage regeneration in the area, Finance Minister Bill English said.
"Driving through some of the deprived areas of Tamaki makes plain why the Government is determined to do a better job of social housing," Mr English said.
"It also illustrates the development opportunities in some of the HNZC-dominated suburbs in Auckland."
The TRC is jointly owned by the Government and Auckland Council.
Mr English said the company plans to build 7500 new houses in the place of the 2500 existing ones in the next 10 to 15 years.
More than half of the new houses would be sold and the remainder would be retained as social housing.
The Government last week approved a $200 million loan available to TRC to accelerate its work in Tamaki.
Housing Minister Dr Nick Smith said it was "abundantly clear" the Government was serious about seeing action in Tamaki.
A business case will be developed by the Government, Auckland Council and the TRC in coming moths to look at how future developments would work, he said."
Change has been slow to come to Tamaki but we are determined for the next decade in Tamaki to look very different to the decade past," he said.
"This is about giving TRC the tools it needs to develop the homes on-site to make a difference to people with high housing needs."
Off-loading of state houses "reckless"
The move has been labelled as "reckless" by Labour housing spokesman Phil Twyford.
The properties were believed to house about 8000 people and were likely to be worth more than half a billion dollars, Mr Twyford said.
The Tamaki Redevelopment Company has only been going for three years and has no experience of being a landlord.
"The danger is that by forcing this tiny organisation to become a major landlord they will lose focus on their original purpose to spearhead Glen Innes' urban renewal.
"Now Bill English's desperation to sell off state houses has seen him foist 2800 houses on them, forcing them to become one of the country's biggest landlords overnight."
The AMP360 housing affordability report released yesterday showed lower quartile houses in Auckland rose on average by $32,000 each month, Mr Twyford said.
Auckland houses prices were spiralling and the Government's housing policy was "crashing around their ears", he said.
"In his desperation to look like he is doing something, Bill English's risky move at Tamaki could put a half-billion dollar asset, 8000 state house tenants, and an important urban renewal project in jeopardy."
Maungakiekie-Tamaki Local Board chairman Simon Randall said redevelopment would probably involve land swaps of reserve land and land for housing.
"An example is Maybury Park. There are issues about street views and visibility into that park," he said.
"If we can do some land swap to ensure that park better meets the needs of that community, we are keen on that."
Tamaki Primary School principal Rhonda Kelly said she had been assured that the community would be listened to as development plans were drawn up.
"I feel the community is going to feel more connected to what's happening," she said.
Local Samoan matai Aiiloilo Dr Elise Puni said the community was developing a "working partnership" with the redevelopment company.