An announcement about a wet house in Wellington, which will allow alcoholics and drug addicts access to alcohol, will be made in August.
A platform of Wellington mayor Justin Lester's election campaign last year, the wet house will receive funding from outside partners.
A wet house will have a hostel-like environment and addicts will undergo rehabilitation programmes.
The council is looking at a building in the CBD, Mr Lester says.
It may be the first of other wet houses to be set up in the city and is part of the council's strategy to combat homelessness on Wellington's streets.
"We live in the real world and there are vulnerable people who need and deserve help," he said.
Mr Lester said a wet house pays for itself in the long term, as the resources of council, police and emergency services in the homelessness area are reduced.