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The Queenstown Lakes Community Housing Trust wants to build 65 to 70 homes on the 3.68ha site, which neighbours the Arrowtown Golf Club at the township’s southern end.
The land has been earmarked for affordable housing since 2003, but one of the obstacles to its development has been its "public utility" status.
Now, as part of a renewed effort by the council and trust to get the development over the line, Minister for Local Government Nanaia Mahuta has approved a change of status to one of affordable housing.
Queenstown Lakes Mayor Jim Boult said he was delighted by the outcome, which had taken "collective efforts" by the council and trust.
Housing trust chairman Andrew Blair said the trust was working on a master plan and house concepts for the site.
"We look forward to receiving the land and commencing with civil works later this year".
The next step is for the council to transfer the land to the trust, which can then apply for resource consent for the development.
The trust indicated last year it wants to build five one-bedroom units, 20 two-bedroom homes, 36 three-bedroom homes and four four-bedroom homes.
The homes would be allocated among its affordable rental, senior housing and Secure Home schemes.
The Secure Home scheme allows qualifying households on its waiting list to buy properties through a 100-year lease, while the trust keeps ownership of the land in perpetuity.
Now grazed by horses, part of the Jopp St land used to be a wastewater settling pond for the township.
Geotechnical and contamination reports commissioned by the trust concluded the land could be brought up to a standard that satisfied public safety concerns.