The country's biggest non-government social housing provider is to buy more than 1000 state houses in Tauranga.
Housing New Zealand Minister Bill English said the agreement for Accessible Properties to buy 1124 HNZ properties would soon be finalised, and the charity was expected to starting managing them next year.
"The status quo of one very large state-run provider is not doing a good enough job supporting vulnerable people," Mr English said.
"Letting community organisations provide housing support and services to better connect tenants to the other social agencies they need is a critical way of doing that."
Accessible Properties general manager Andrew Wilson said it was keen to put more resources into tenancy management in Tauranga and cement connections with local iwi.
"What changes is, I think, a tenancy-focused tenancy management services, and a desire to look at the portfolio and make it better suited to the current and future need."
The IHC subsidiary already manages more than 1600 properties, including 500 in the Waikato/Bay of Plenty.
To get the properties, Accessible had to outbid two other companies - Hapori Connect Tauranga and Kainga Community Housing Partners.
There had been protests against the sale by some Tauranga locals, who were concerned that over time the move would result in less social housing.
The Labour Party - which opposed selling state houses - said an ownership change would not help "desperate Tauranga families living in garages and campgrounds" to find an affordable rental.
Housing spokesperson Phil Twyford said it was "immoral" for the government to be selling state houses.
"It is untenable for National to persist with their state house sell-off when the country is in the grip of a housing crisis," he said.
"It should pull the plug on the sell-off now, and commit to a massive house-building programme."
However, Mr Twyford said it was marginally better that a New Zealand-owned company won the right to buy the homes, rather than an overseas firm.
Earlier this year, the sale of state houses in Invercargill was suspended when the only group to submit a proposal pulled out.