New Zealand's second co-housing development has been given urgent council support as it prepares for its construction phase.

Two years ago, the Dunedin City Council indicted it would buy two units in the High St co-housing development. The units were offered at cost.

Resident Catherine Spencer updated the council as to progress on the development, which would house more than 60 residents with communal spaces, on Tuesday afternoon.

SUPPLIED A view of the proposed exterior of the co-housing development.

The project at the site of the old High Street School was now ready to go, but the two-year delay and spiralling building costs had a "huge impact", Spencer said.

Dunedin house prices had leaped 20 per cent since the council pledged its support, she said.

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SUPPLIED An artist's impression of Dunedin's High St Co-housing development.

She urged the council to continue to support the project: "the goals have not changed, only the cost".

After a public excluded meeting on Tuesday afternoon, acting chief executive Sandy Graham said the council would buy one three-bedroom unit for $675,000.

That decision follows the council's previous decision in November 2016 to commit $690,000 to the project.

Hamish McNeilly/Stuff High St Co-housing members, from left, Patricia McLean, Maria Callau and Catherine Spencer at the High St Dunedin site in April 2017.

"Councillors were keen to support the project and the philosophy of co-housing. They also believed that the project was a great way of helping regenerate this prominent site," she said.

Spencer said the group was delighted to support the project.

Earlier, she said if council didn't commit to the project "we would have to delay things".

SUPPLIED The proposed interior of home at Dunedin's High St Co-housing development.

The group had a mid-September deadline with the project's bank, with construction set to begin the same month.

The 4.95 hectare site features triple-glazed windows, centralised hot-water heat pump, electric car charger, children's play area, tunnel house, gardens, and communal space.

"We have to change the way we live," Spencer told councillors.

The multi-storey terraced units were designed to the German passivhaus (passive house) standard, effectively meaning they should be warmer and drier than new homes, and carbon neutral.

The project group formed in 2013 after attending a talk from Robin Allison. He founded Earthsong , which featured 32 terraced houses and eco-apartments on the grounds of an old West Auckland orchard.

The High St development is expected to become the second co-housing project in New Zealand.

The group formed a company in 2013 to buy the site off Ngai Tahu for "around $1 million".

Each property was on its own unit title and the community would be overseen by a body corporate.

Would-be residents had to attend an induction and buy shares in the company.

If a landlord bought a property, any tenants would have to participate in group decisions.

Confirmed residents range from a baby to a retired person in their 70s.