
The Tewa Banks land, on a 3.68ha site in Jopp St, was transferred to the Queenstown Lakes Community Housing Trust for $1 earlier this year after councillors first approved the proposal in April 2019.
Construction of the 68 one-, two-, three- and four-bedroom homes was expected to be completed in 2025.
Outgoing Mayor Jim Boult said the much-needed development had been "many years" in the making.
"Access to affordable housing has a direct link to community wellbeing.
"I am extremely proud of the work by councillors, council staff, and the trust in the massive undertaking to increase the district’s community housing stock, and ultimately the number of locals who now have a roof over their heads thanks to this ongoing effort."
The allocation process for the high-quality and energy-efficient homes was expected to start mid-next year and would include several homes specifically allocated for senior housing.
About 45 homes were expected to be sold into the trust’s secure home programme, through which the trust retains ownership of the properties, while households purchase the right to occupy at the cost of house construction, excluding land.
Households then paid an annual ground rental to the trust, set below market value — only increasing annually with inflation for the period the household remains in the programme — ensuring the initial purchase price and ongoing ground rent remain affordable.
Once the household was ready to sell, the home was purchased back by the trust at the original purchase price, with an adjustment for inflation and any property improvements.
Trust executive officer Julie Scott said it was exciting for the organisation to finally be breaking ground on the development.
"We’ve received resounding feedback from the community of the need for more affordable housing in Arrowtown, and accordingly we’re truly excited to start building 68 new homes for local singles, couples and families in high-quality homes."
Last week, Ms Scott told the Otago Daily Times the trust had 800 families on its wait list, but had to push a goal to deliver 1000 affordable homes across the district back from 2028 to 2038 because it was "too challenging" to get 1000 affordable homes built in 10 years.
Mr Boult believed over the past two terms the council had come a "long way" in providing pathways to affordable housing and was doing "far more" than any other council in the country in that regard.
"Our work on inclusionary zoning is a fine example of that leadership."
A New Zealand-first, the council last month eventually voted 10-1 to publicly notify a plan change to include inclusionary zoning provisions in its district plan to increase the amount of affordable housing across the district.
The policy would apply to subdivisions within residential zones which resulted in more than one new lot, requiring developers to contribute 5% of the estimated sales value, or a land contribution.
Those would fund the ongoing construction of affordable housing for low- to medium-income households.