It comes as the city experiences a serious shortage of social housing, and the developer involved in this initiative hopes it will be a "small step" to addressing the problem.
The national state housing agency confirmed it had signed an agreement with TGC to buy seven brand-new two-bedroom homes at 19 Galloway St, Mornington, once they were completed.
Regional director Kerrie Young said the new homes would be used to meet the need for public housing in Dunedin and would provide more people with a warm and dry place to live.
"Dunedin continues to be a priority area for us based on current demand.
"A large proportion of our homes in the city are among the oldest in the country, so it’s important we continue to renew our portfolio and purchasing new homes from developers is one of the ways we can do this."
TGC director George Hercus said the company specialised in high-end town houses for retirees, first-home buyers and social housing needs.
"There is an urgent and dire need for social housing in Dunedin, and we hope our efforts will be a small step in the right direction."
In December 2023, there were 430 people in Dunedin on the social housing waiting list, the Ministry for Social Development’s housing register said.
In December 2020, there were 264.
Mr Hercus said the challenge to provide social housing in Dunedin was enormous.
"Social housing is at crisis in the city, and this is only a small step."
The Galloway St development would be "well suited" to modern lifestyles, as each one came with its own off-street parking, Ms Young said.
"We are particularly focused on providing new homes in areas of the city that are well connected to amenities, open green spaces and services.
"The Galloway St development delivers this for us."
Construction of the homes had begun and was expected to be completed by the end of this year.
"We’re delighted to have partnered with TGC on this high-quality development and are looking forward to whānau moving in to the new homes later in the year."
It planned to have delivered 110 new homes in Dunedin by the close of the 2023-24 financial year, and hoped to deliver another 179 in the 2024-25 financial year, and at least a further 25 for the 2025-26 financial year, Ms Young said.
Late last year, the government set up an independent review examining Kāinga Ora’s financial situation, procurement and management.
It is due to report back later this month.
