Kāinga Ora regional director Kerrie Young confirmed the moves on Friday, as "developing the site to provide social housing is no longer financially viable".
"Since purchasing the property with the intention to provide social housing on the site, we have explored multiple options and layout plans.
"However, the cost of building homes has risen dramatically over the past few years and the economic environment and property market are now markedly different. Naturally, that impacts on our budgets.
"We need to make sure we're investing in the right places, at the right time and it has become clear it is not viable for us to develop this site to provide social housing."
The park was bought by Kāinga Ora for more than $4million about four years ago. After being used as a supported isolation and quarantine (SIQ) facility, it has remained empty, gathering weeds and leaving the public wondering about its future.
Last year, Dunedin Mayor Jules Radich proposed the site as a possible temporary housing complex for homeless people, but Housing Minister Chris Bishop rejected this idea, as the building lacked "local services required for a cohort of individuals with complex needs".
The buildings also did not comply with fulltime residential occupation requirements, and extensive upgrades would be needed to bring them up to standard, he said.
Ms Young said the property would be listed for sale next week.
"A real estate agent has been engaged to list the site and from there any interested parties can engage with the sale process via the agent and undertake their own due diligence – just like any other open market sale."
The national housing agency is in the midst of a major overhaul, after a review conducted by former Prime Minister Sir Bill English declared the organisation was neither financially sustainable nor delivering enough houses.
Ms Young said the organisation remained "committed to renewing our housing in Dunedin".
"Over the past three years Kāinga Ora has delivered 133 new state homes in the Dunedin area, with a further 49 homes either under construction or contracted for delivery by June 2025."
