Taxpayers will act as the guarantor on new social housing projects under a $1 billion Andrews government policy aimed at boosting affordable homes for vulnerable people.
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Housing associations have often struggled to get loans from banks to build housing projects because of the risk of default, but from next financial year the Victorian government will act as guarantor for up to $1 billion worth of projects.
Housing Minister Martin Foley said this would lower the risk for banks and help improve the cost of loans for housing organisations to build.
Victoria has the lowest percentage of social housing in the country. Growing demand has put pressure on the sector to build more houses and renovate existing stock to better cater for needs. One and two-bedroom homes are most in demand.
A major contributor to social housing demand is women fleeing domestic violence.
A separate $100 million rolling loan facility will also be set up by the state government for registered housing associations to borrow from the Treasury to build stock.
The announcements are the first major part of Labor's long-awaited housing affordability strategy, which will be released over the coming weeks and is aimed at all aspects of home ownership and housing.
The government's policy follows reports that the Turnbull government could scrap the multibillion-dollar National Housing Affordability Agreement, set up by the Rudd government, because of its failure to boost public housing spots.
Unison Housing chief executive Michael Perusco said the policy would allow organisations to leverage funding from the private sector and increase the pool of capital to build affordable social housing.
"The increased homelessness that we are seeing in the Melbourne CBD is the physical manifestation of the housing crisis and it is critical we find ways to deliver more options for low-income Victorians," he said.
"Much of the security we can offer does not give the banks the level of confidence that they need to offer low-cost capital.
"So this is a great step forward and provides a level of funding flexibility that will stimulate innovation and increase much-needed supply at the lower end of the market."
Mr Foley said the plan would mean community housing providers could build more homes for Victorians in need.
"Banks and lending authorities can have confidence to lend to these providers at the lowest rates," he said.
