Housing units being built in a prominent position in Victoria Ave will be for people who are "a bit out of luck" and need Government help to pay their rent.
Soho Group is building 26 housing units on the site of the former Midtown Motor Inn at 321 Victoria Ave.
There will be 10 one-bedroom units, 14 two-bedroom units and two three-bedroom dwellings, managing director Sam Wallace said.
"We are expecting long term housing tenants to live there, assisted by Government with their rentals."
Soho is doing the development and intends to carry on owning it.
The tenancies will be managed by Wellington-based Compass Housing Services New Zealand, a nonprofit entity.
"They're a really crucial part of this. We build the properties and own and look after the assets. They look after the tenants."
The 0.4ha property was bought from the Wairarapa Building Society, with settlement this year. It had been leased by a father and son, who ran the motel and a bar on the avenue.
The property will be split, Wallace said. He is looking for a tenant for the commercial property on the street front but said it cannot be a TAB or a liquor store and he has cancelled its pokie machine licence.
"We have got to be respectful of the tenants."
The L-shaped former motel at the rear used to have 33 units. They are being converted into 18 dwellings.
Workers are busting through walls, increasing insulation to get to building code, and putting solar panels on the roof to bring down the cost of power. They have found a lot of asbestos.
"They're going to be really nice places, of a high standard. We are the long term owners and we are putting in a lot of effort," Wallace said.
A new building is going up on the former house site. It will have eight more units that face north.
The grounds will be landscaped, and Wallace has managed, with difficulty, to keep the large pohutukawa tree. Each dwelling will have parking for one car, and they are close to a lot of amenities, Wallace said.
He is the son of Jonathan Wallace, who was raised in Whanganui and began the Wallace Development Company here at the age of 21. It has been responsible for other developments in Whanganui, including the new City Fitness gym and the Cotton On store.
Soho is a spin-off from the Wallace Development Company, doing residential rather than commercial developments. It has been working with the Ministry of Social Development on housing ideas for three years.
It has three other public housing projects, in Henderson, Papakura and Palmerston North. Whanganui's will be the second to open.
The contractors are W & W Construction 2010 and Isles Construction. Whanganui District Council has been helpful.
"They made the building consent really easy for us. Full credit to them."
Wallace is open to working with iwi and others to provide more housing in Whanganui.
"It's a big undertaking, creating long term housing in Whanganui, where we come from. We are really happy that we can have a positive impact here," he said.