Fletcher Building's residential division has signed an agreement with the government to build 196 homes on surplus Crown land in Auckland.

The development of 9.2 hectares of former Ministry of Education land in Massey East will cost $130 million and infrastructure work will start later this year, Building and Housing Minister Nick Smith said in a statement.

A third of those homes will be made available for social housing, and the first homes will be finished in August 2017.

The Crown land programme, where vacant land held by Crown entities, public agencies and private developers is bought by the core government for housing development, was announced in the 2015 budget when the government committed $52.2 million to it. A further $100 million was added in the latest budget to buy more land.


The property developer, in this case Fletcher Residential, pays for the development with the expectation they will make money when the houses sell. The government expects to make its money back when the houses are sold, and is able to place requirements on development pace and the proportion of affordable and social housing in the development.

Across the whole programme, 20 per cent must be affordable housing and 20 percent social housing.

Under the government's settlement with Ngā Mana Whenua o Tāmaki Makaurau, the iwi must be offered first right of refusal on development of Crown land through its limited partnership.

The Iwi partnership declined the offer and it was subsequently offered to Fletcher Residential, which was the top-ranked low-density developer from the Ministry of Business, Innovation and Employment's (MBIE) open competitive process carried out in 2015, the statement said.

MBIE has three panels for housing development, specialising in low-, medium-, and high-density development, each comprising three ranked developers. After the Iwi partnership, the top-ranked developer has the next opportunity to develop a site made available under the Crown land programme.

On Wednesday, it was reported that New Zealand's median house price had topped $500,000 for the first time, and had reached $805,000 in Auckland.

New Zealand's housing market is on a tear, driven by record migration and low interest rates, particularly in Auckland where the government and Reserve Bank have introduced measures to try to slow house price growth.