Otago Southland regional director Kerrie Young said the redevelopments were planned at 4, 6 and 8 Lorne St, Mosgiel.
Two four-bedroom homes, five three-bedroom homes and 11 two-bedroom homes would be built to respond to the high demand for smaller homes in the region.
Increasing the number of homes on some sites meant more people could live in areas that had good transport options and were close to schools, open spaces, shops and other amenities, she said.
"There is an urgent need for more public housing options in Mosgiel and the redevelopment of these properties will help us meet some of this need.
"The 18 new homes that will be built on the 5013sqm parcel of land will enable us to house more people, within an existing community, close to a local school and nearby main transport routes," Ms Young said.
"When building more homes on existing sites, we are very mindful of privacy for our customers and neighbours.
Ms Young said the new homes were still in the planning stage and an application for resource consent had been made.
Site preparations, starting with soil testing, were expected to begin in the next few weeks, followed by demolition which was expected to start next month.
"This is a positive development for Mosgiel and we’re looking forward to construction commencing and delivering these new homes to the community."
