They will be aimed at low-income tenants, with some offered as rentals and some under a rent-to-buy scheme.
Under the other three projects, the Chinese New Settlers Services Trust will build 33 units in Panmure for low-income elderly Asian residents, Accessible Properties Auckland will build 13 units in New Lynn, Northern Glen Innes and Weymouth, and Vision West Community Trust will build 21 units in New Lynn, Henderson and Kelston.
Dr Smith said the 87 new homes was a "drop in the bucket" for Auckland's housing challenge.
But he said it was a significant step towards the Government's goal of increasing the proportion of social housing provided by the community sector to about 20 per cent by 2018.
"At the moment in Auckland we only have about 400 community social houses, so another 87 is 20 per cent growth," Dr Smith said.
"The Government is not saying that these 87 homes and this $16.7 million investment is a big part of the solution. What we are saying is we need to do a whole lot of things to get on top of Auckland's housing challenge, and one of those is growing the community social housing sector."
The partnerships with community organisations meant the Government was providing only about 40 per cent of the total cost, he said.
"It really shows how the Government is able to leverage off its taxpayer investment to get houses that are costing us about $180,000 each, as compared if we make an investment in Housing Corp, they cost more than double that."
Dr Smith said some housing would be provided on income-related rents, where tenants were guaranteed not to pay more than 25 per cent of their income. Those would be aimed at people on incomes of less than $45,000 per year.
He said legislation, expected to be passed by the end of the year, would also allow community social housing tenants to qualify for a rent subsidy currently available only to state house tenants.
Auckland Mayor Len Brown did not attend the announcement but said in a statement the project was a good example of the Auckland Council working with government to tackle the city's housing challenges.
The Trent St land was owned by Auckland Council and was identified as being well suited to provide higher density housing.
Brian Donnelly from the New Zealand Housing Foundation said he expected work to begin next year, and the development to be completed by 2015.
It would include an esplanade reserve that would not be built on, and would involve retaining some mature trees on the site.
Last week Dr Smith announced three social housing developments in Christchurch providing 51 homes, with a total investment of $17.3m, of which $8.7m came from the Government's Social Housing Unit.
