Homes Victoria warns it won’t have enough money to cover ’core business expenditure’ without bailout

An agency that is propped up with cash from the Andrews government’s Big Housing Build is facing financial ruin.

Victoria’s new public housing operator is under threat with a massive bailout needed to save it from financial collapse.

Homes Victoria has warned Treasurer Tim Pallas that without a significant cash injection it won’t have enough money to cover “core business expenditure”.

The agency was created in 2020 to oversee public housing, community housing and crisis accommodation in over 64,000 public houses across the state.

But a ministerial briefing, released under Freedom of Information, shows the delivery of program services is at high risk because of Homes Victoria’s dire financial position.

Infrastructure maintenance, the capability to meet operational requirements, compliance and financial sustainability are also at risk.

Despite a recent increase to its base funding, the agency continues to operate at an unsustainable loss.

A ministerial briefing has revealed Homes Victoria’s dire financial position. Picture: Sarah Matray

It is being propped up with cash from the Andrews Government’s signature Big Housing Build.

The $5.3bn project has repeatedly been touted as the “largest single investment in social and affordable housing in any state or territory’s history”.

The true scale of Homes Victoria’s financial troubles is unknown, with the state government keeping secret the underlying deficit.

“In its 2021-22 Annual Budget, HV is forecasting an underlying deficit of (redacted) in 2021-22, despite the increase in its base funding,” December’s ministerial briefing warned.

“This deficit will be covered by cash received to deliver the Big Housing Build (BHB) program, enabling HV to maintain the Government’s minimum (redacted) cash-at-bank requirement.

“However, HV also anticipates that without additional financial sustainability measures in place, the cumulative effect of operating deficits in the short term will erode its cash balances and compromise the Government’s cash-at-bank requirement.

“The receipt of BHB funding ahead of payment timelines will mask the effects of the shortfall on HV’s cash position over the next couple of years.

“However, once BHB payments are made, and without additional financial sustainability strategies in place, HV estimates that there will be insufficient cash to maintain the (redacted) cash balance target and cover core business expenditure.”

The Big Housing Build is touted as the ‘largest single investment in social and affordable housing in any state or territory’s history’. Picture: David Crosling

A government spokesman said the core operations of Homes Victoria were largely funded by rental income derived from public housing tenants.

She said over a decade rental revenues and funding from the Commonwealth National Housing and Homelessness Agreement had declined in real terms.

“About 50 per cent of Homes Victoria’s revenue comes from rents collected from tenants and 45 per cent from the Commonwealth’s National Housing and Homelessness Agreement – which over the past 10 years, the Abbott-Turnbull-Morrison Government failed to adequately fund,” she said.

Shadow Treasurer, David Davis, described the situation as a “financial catastrophe”.

“Some of the most vulnerable people in our community depend on Homes Victoria, but Daniel Andrews’ incompetence and mismanagement has put them at risk,” he said.

“Financial management matters because running Homes Victoria into the ground as Andrews and Labor have done compromises its ability to deliver for those vulnerable people for whom it has responsibility.

“Labor cannot be trusted with money. Everywhere you look across government there are growing deficits and surging debt with their waste and mismanagement putting critical government services at risk.

“This FOI has blown the whistle on Treasurer Pallas’ financial irresponsibility in allowing Big Housing Build money to be cannibalised to prop up the financial basket case that is Homes Victoria.”

Mr Davis said refusing to reveal the underlying deficit smacked of a cover-up.

“Things are not getting better, they are getting worse under Labor. Now the Treasurer is knowingly misusing housing capital money to prop up a failing system,” he said.