"This is an exciting opportunity to advance this relationship through this venture," Mair said.
"This housing project is a real opportunity to progress the housing aspirations of our whānau and community, in particular the absolute shortage of housing we are experiencing in our community."
Mair said the need for affordable and quality housing was paramount and would be a particular focus of the project.
Intergenerational housing will be part of the plan.
Recipients of the funding, which comes courtesy of the Infrastructure Acceleration Fund (IAF), are responsible for delivering the infrastructure and building the homes it enables.
Whanganui District Council chief executive David Langford said it was a fantastic result for Whanganui.
"The funding will allow Whanganui District Council to quickly build the core infrastructure needed to get this development off the ground."
Additional homes would have a big impact on easing housing pressures and the council was looking forward to seeing the development get underway, Langford said.
The IAF is a contestable fund of about $1 billion, designed to allocate funding for infrastructure to enable housing development.
It was launched in June 2021 and is administered by Kāinga Ora – Homes and Communities.
