The number of applicants on waiting lists for public housing in the Portland and Warrnambool areas jumped to 673 in the September quarter, up from 623 in June.

The figure was just the tip of the iceberg, with more families simply not bothering to apply, according to Community Connections social housing advocate Gary Lucas.

"You're looking at the very least, somewhere around a couple of thousand people who meet the criteria for public housing but they just can't get in," he said.

"It's exacerbated because of the amount of construction work going on here at the moment."

Mr Lucas' comments came as work continued on Mortlake's $640 million gas-fired power plant and the $80 million redevelopment of South West Healthcare's Warrnambool hospital.

Many more energy projects are planned and would put further stress on the region's limited housing stock, he added. During the September quarter, 101 Warrnambool applicants were placed on the emergency waiting list while another 484 families were on the lower priority list.

In June, the figure stood at 557 applicants, up by just four on the March quarter.

Mr Lucas called for government rent assistance payments to be poured into building more accommodation because the payments inflated the private market and made properties more unattainable.

He also took aim at so-called "rental auctions" which pushed once affordable properties out of reach for those doing it tough.

He said the office of housing was in the process of building six units on two blocks which once hosted two houses.

Warrnambool Public Tenants Association chair Dawn Mace was shocked to learn of the latest increase.

"That's shocking, that's disgusting," she said. She knew of at least one house on McGreggors Road which had burned down several months ago and the land remained vacant.

South West Coast MP Denis Napthine slammed the waiting list increase.

"These are the most vulnerable Victorians who are homeless or at risk of recurring homelessness, coping with a disability or who have special housing needs," he said.

A spokesman for Housing Minister Richard Wynne in June said work would start on 23 new properties in Warrnambool by Christmas and 50 more throughout the region.