The Porirua City Council has cleared a property developer's plan to build up to 18 relocatable apartments in an effort to revitalise the city centre.
The council says the land on Lyttelton Avenue is not well utilised and only used "informally" as a carpark.
The Wellington Company - owned by property developer Ian Cassels - has been granted a 10-year lease with two five-year rights of renewal.
Mr Cassels said the two-bedroomed units would be prefabricated. He said the units were part of the company's CitiBlox concept and could be bolted together in blocks up to three units high.
Talks had begun with the government about a partnership to temporarily place 2000 CitiBlox apartments on vacant Crown land in Auckland, Wellington and Christchurch, he said.
"The government and local authorities are sitting on massive amounts of land.
"Much of it is stockpiled for future use, which may be decades away."
The modular 72 square metre units would be rented out for about $300-$400 a week. They could be disconnected and relocated.
Mr Cassels said it was "too hard to give an estimate" on what the company's returns could be, but said the company would "make a fair return on it" if hundreds of unit were built.
"The idea is driven by the idea that we want these things to be factory buildable and we want them to be transportable on a truck.
"All the components arrive in the factory and it gets assembled very quickly, very little wastage and they can be building in 95 percent of the country with what we call a group building consent from MBIE (Ministry of Business, Innovation and Employment)."
Mr Cassels said Citiblox challenged conventional construction methods because the units were so quick to construct and their price would come down, the more they were produced.
"It'll tip acid into the construction market and make it a lot more efficient."
Porirua City Council spokesman Bryan Patchett said the council was actively seeking to partner with the private sector to develop central city housing by offering financial incentives to residential developers, with reduced development and rating costs.
"This residential project is one of the first residential cabs off the rank. It's attractive because it overlooks the Porirua Stream and has great connections to Porirua Railway Station and motorway."
Mr Patchett said the council was only leasing the land for up to 20 years as it was a potentially strategic site in the longer term.