The housing strategy announced Monday says the government will use the money to create a diverse mix of housing for people with varying income levels.
Premier Darrell Dexter says the government realizes many working families can't afford rent and many seniors and people with disabilities also lack good housing.
The strategy also says the province will work on ways to help seniors and people with disabilities to stay at home and live in their communities.
The strategy calls for the merging of the Nova Scotia Housing Development Corp. and all housing staff in Community Services into the Housing Nova Scotia agency.
A spokeswoman for Community Services says in an email that the $500-million investment would come "on top of $140 million to $160 million per year," of existing funding for housing.
The department says Housing Nova Scotia also plans to generate additional revenues from mortgages and property developments, and to reinvest those funds.