The project could be a "game changer" for Flaxmere, and Mr Key's speech was an auspicious development.
"I think it's exciting. It's given us a solution to get out of the mucky mire that we're marinating in.
"We're going to be the masters of our own destiny."
Housing New Zealand Minister Bill English had personally assured him that Te Aranga Ltd was "at the table" in terms of becoming a provider, although it was unclear when the accreditation process would be completed.
"I'd be very disappointed if something tangible didn't come to fruition by the end of the year."
Labour's Tukituki spokeswoman Anna Lorck said there were "no excuses left" for the Government not to approve the project.
"For seven years the Flaxmere Housing Project has been left dangling on a string while the government has pussy footed around and continually denied Flaxmere the opportunity to deliver social housing. Now that the government has finally come clean on its state housing plans, it has no excuses left and must give the Flaxmere Housing Project the go ahead."
A Ministry of Business, Innovation and Employment spokesperson said Te Aranga Ltd "has had some contact with the Social Housing Unit in the past to discuss their interest in the possibility of transferring ownership of Housing New Zealand's existing social housing units in Flaxmere".