The New Zealand government and Christchurch City Council will spend $NZ125 million ($A116.56 million) on encouraging cheaper housing to be built in the city desperately short of such accommodation.

A housing accord, announced on Wednesday, will see the government invest $NZ75m and the council $NZ50m into an entity which will encourage private investment. As part of the deal, the government will build two villages totalling 180 houses on the council-owned land on the former Sydenham School site and in…