The Government is finalising an agreement with IHC subsidiary Accessible Properties on the sale of 1124 state houses in Tauranga.
Finance Minister Bill English says he expects negotiations will be completed in October.
The Government is selling batches of state houses in several centres, amid strident protests from Labour and the Greens.
Mr English says the aim is to develop more diverse ownership of social housing.
"The status quo - one very large state-run provider - is not doing a good enough job supporting vulnerable people," he said on Friday.
"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."
Social Housing Minister Paula Bennett says existing tenancy conditions will remain the same.
But Labour's housing spokesman Phil Twyford says the sell-off won't house a single homeless person or help anyone in the city find a home to live in.
"Tauranga, like the rest of New Zealand, has a crisis of housing affordability and homelessness. It has pensioners living in campgrounds, and families sleeping in cars. Selling off the city’s state houses will do nothing to house these people."
He says the Government is continuing along the path of getting rid of state houses as part of an "ideological agenda".
"When there is a desperate housing shortage, the obvious solution is to build more houses. But National just doesn’t get it."
Accessible Properties has managed housing for vulnerable people for more than 60 years, and currently looks after 1600 properties across the country.
It was one of three shortlisted respondents.