The Government is giving the new housing entity Kāinga Ora a $4 billion leap in borrowing limits, of up to $7.1 billion.
Its previous Borrowing Protocol limit was $3.05 billion.
In a statement by Kāinga Ora, officials say the increase "provides headroom for future debt issuance, helping us to continue financing much-needed warm, dry and safe houses across New Zealand".
Kāinga Ora provides tenancy services and is responsible for building and maintaining state houses. It also works to deliver urban developments and KiwiBuild.
Finance Minister Grant Robertson and Housing Minister Megan Woods approved the increase in December 2019, to take effect from January 1.
It will go towards infrastructure costs and upgrading state houses.
Ms Woods said the additional borrowing would enable Kāinga Ora "to continue to deliver more public housing of the right size in the right place".
"This includes progressing large scale urban developments in Northcote, Mangere, Mt Roskill and Oranga, which will deliver around 22,000 new homes over the next 10 to 15 years in Auckland. The majority of these costs are for infrastructure"
"Currently we have record low rates on the cost of borrowing and we’re using that to invest in our people."
Kāinga Ora, created last October, also planned to issue $2.5 billion of Wellbeing Bonds this year.
"We expect to launch a longer-dated Wellbeing Bond in the next few months, subject to market conditions, extending the curve beyond the existing October 2028 maturity," the statement said.
"Increasing the average maturity of the debt portfolio is an important goal for Kāinga Ora, given the nature of our asset base, and we remain open to reverse inquiry for longer-dated issues."
Kāinga Ora acting chief executive Greg Groufsky said the borrowing limit would "see us maintain the good momentum we have with the delivery of more state homes" and help with upgrades of old state homes".
"The funding will also finance the extensive programmes which are upgrading and renewing older state homes to make them warmer, drier and healthier for our customers."
Mr Groufsky said it would also go towards upgrading 2000 older homes and upgrade about 500 larger multi-dwelling complexes.
In addition to the building of more homes, the funding will also finance the extensive programmes which are upgrading and renewing older state homes to make them warmer, drier and healthier for our customers.
It comes as the waiting list for public housing hits highs, with almost 14,500 households on the list. At the end of June, there were 12,311 people waiting for a social house. Another 2580 were waiting for a transfer.
More than 1400 state homes were built in 2018/19.
Mr Robertson previously had cited low debt and the low interest rates in relation to current borrowing.