Far North mayor John Carter said the custom-built facility would meet all animal welfare standards.
"I acknowledge that our existing Northern Animal Shelter has not been ideal as a facility.
This new, specially-designed shelter will improve the welfare of dogs and provide a much safer work environment for staff."
Kaitaia-based KPH Construction started work on the new shelter last month. The company's previous Kaitaia projects include Te Ahu, the fire station, courthouse, police station and St John Ambulance station.
The council expects the shelter will take six months to build and be operational by April 2021. The existing pound will then be demolished.
Bay of Islands Watchdogs co-ordinator Leonie Exel said she was relieved construction had begun, that the new design was attempting to meet animal welfare standards, and that it would be open to the public.
However, the group still had serious concerns about the site, which was next to large sewage ponds.
In 2016 council management advised the site was not suitable due to health and safety risks but the previous elected council had decided to rebuild there.
It seemed the decision had been made out of desperation because council management had failed to find an alternative site, Exel said.
Health and safety issues raised by the Watchdogs included a history of avian botulism with hundreds of birds dying in the ponds, blowback from the ponds on windy days, and stormwater risks.
District councillor Felicity Foy said site suitability and risk mitigation were addressed in the resource consent and design stages.
''I'm just relieved that after five years we're finally making progress. We have the resource consent, we have the building consent and we have the funding.''
Finding a suitable location for an animal shelter was always challenging, she said.
''No one wants to be next to a sewage pond and no one wants to be next to dog pound.''
Dogs, however, were not troubled by smells.
Meanwhile, work on the council's new Southern Animal Shelter at Melka Kennels, on Ngapuhi Rd near Kaikohe, is still in the design phase.
The project was pledged financial support under the Government's ''shovel-ready'' Covid recovery programme.
The council said design work had taken longer than expected due to delays caused by the Covid-19 lockdown. It aimed to start construction in early 2021.