Hundreds of what the Government says are affordable homes are to be built at its Hobsonville Point development in Auckland.
The Government says 10% of up to 3000 homes on the site will cost less than $400,000 at today's prices, with another 10% costing up to $485,000 - a total of up to 600 dwellings.
Housing Minister Phil Heatley says by building smaller, high-density homes the prices can be achieved without needing any government subsidies.
He says these homes will not meet the housing demand in Auckland, but they are a start.
Hobsonville Point is the country's largest housing development, which a Government-owned company is building on a former Air Force base.
The cheaper homes, to be built over the next 10 to 15 years, are expected to be terrace-style, ranging from one to three bedrooms.
Mr Heatley says the lessons learned by builders on the development will allow more good quality, affordable homes to be built around the country.
The Government was criticised earlier this year for axing the Gateway scheme for lower income buyers, after offering 17 homes in the development.
Cynical move says Labour
The Labour Party leader is accusing the Government of cynical politics over the announcement.
David Shearer, who is at Labour's annual conference in Auckland, says the announcement represents a flip-flop by the Government.
He says the Government is only announcing the change because it suspects Labour will make an announcement about affordable housing this weekend.
Mr Shearer says while he welcomes the Hobsonville announcement, more needs to be done to provide affordable housing throughout the country.