Up to 140 residential blocks will be created to attract workers and create jobs in Simpson and Timboon after a $2 million cash injection from the state government.

Minister for Regional Development Mary-Anne Thomas on Thursday visited a five-hectare site on Curdies Road, Timboon, which will now be unlocked for development.

"The number one issue that is raised with me wherever I go as Minister for regional development is housing," Ms Thomas said.

"It's a chicken and egg issue because it's also about workforce.

"What we know right across regional Victoria is that it is the best place to live, work and invest - if you can find a house to live.

"COVID has only exacerbated a challenge that we've experienced for quite some time, which is the shortage of the right housing in the right place.

"We're very conscious of market failure where it exists across parts of rural Victoria and that's when it is appropriate that the government intervene to provide some support.

"So I'm delighted to be announcing $2 million as part of our regional workforce pilots program for the Corangamite Shire to unlock this spectacular land which is owned by council, but also to enable the unlocking of privately-owned land in Simpson."

The government also tipped in $465,000 for the Koroit Caravan Park Workers Accommodation initiative. The cash will support Moyne Shire Council provide five affordable housing units at the council-managed caravan park, with a focus on accommodation for short-term workers.

Corangamite Shire's 'Unlocking Housing' project aims to set the towns up for a secure and prosperous future with up to 100 of the blocks on 11 hectares in Simpson and 40 on five hectares in Timboon.

Around 4000 workers in the region live outside it due to the lack of housing.

In Corangamite Shire the current rental vacancy is 0.26 per cent.

Only 17 properties are available for a population of more than 16,053 people with 18 per cent of the region's population renting.

The average house costs $330 to rent in the shire.

Housing stock variance has dropped more than 10 per cent so far this year compared with last year.

Corangamite Shire mayor Ruth Gstrein said the project will be up and running in a matter of months.

"In Corangamite three years ago we wouldn't have thought we'd have a population issue - I'm delighted we do - but it comes with the pressures of finding housing and unlocking residential land," she said.

She said $1m would be spent in each town to develop the houses. Work will include 400 metres of water mains plus sewer extension to a new pump station, road, kerb and channel, drainage power and telecommunications infrastructure.

"The money is unlocked and away we go," Cr Gstrein said.

Corangamite Shire sustainable development director Justine Linley said the land had been surveyed and subdivision laid out.

A community reference group has been establish to guide the development in Timboon and Simpson.

"Committee members will be actively involved in setting out what the community is going to look like and what other facilities it will have like walking paths, landscaping and a community garden.

"We're hoping to be able to really officially turn the sod in 2023. So in about this time next year."

The dwellings will be residential housing that will match surrounding houses in the areas.

The council is working with the Great South Coast Regional Partnership which is made up of Moyne, Surf Coast, Colac Otway, Southern Grampians and Glenelg Shire to develop a 'Homes for Key Workers Action Plan' which will address housing availability and affordability.

A residential land review for Camperdown, Cobden and Terang, rural living strategy and key worker housing plan shows the shortage of supply has compounded inflation in the local property market.

The situation is the same for Timboon and Simpson.

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