Welfare groups warn that vulnerable Canberrans will be hit hard by a $3.6 million ACT government cut to services for the homeless.
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Housing Minister Shane Rattenbury said Housing ACT had been subsidising services to make up for federal cuts but could no longer afford to do so.
The reduction in funding would be phased in over three years, he said.
Leigh Watson, head of advocacy organisation ACT Shelter, said the loss of funding would be ''horrendous'' for people experiencing homelessness in Canberra.
Ms Watson said homelessness was a huge problem in Canberra, with half of all people seeking emergency shelter turned away. ''We understand these are fiscally strained times, but at the end of the day housing is a human right, and when people aren't housed they're not able to contribute meaningfully to life,'' she said.
Australian Bureau of Statistics estimates in 2011 put the number of homeless in the ACT on any given night at 1785 people, more than half of whom were in supported or emergency accommodation.
Ms Watson said people experiencing ''secondary'' homelessness, staying on friends' couches or in emergency shelters, would be hardest hit by the cuts.
''Housing affordability is also a key issue here. There's always been homelessness but it has certainly increased proportionately to Canberra's unaffordability,'' she said.
Mr Rattenbury said he was working with housing and support services to find operational efficiencies and ensure there was no reduction in beds available to homeless people.
''This is not great news for the sector, I have to be honest about that. It's not great news at all and everybody's very nervous about it,'' the Greens minister said. ''I guess what we are trying to do in a difficult situation is do it as well as we can.''
Mr Rattenbury said federal funding for ACT housing and support services now sat at $3.7 million a year less than in 2009, after the Commonwealth switched to a population-based funding model. Federal funding would continue to drop and in 2014-15 would be $5.9 million less than in 2009, he said.
The minister said the ACT government had decided to defer the cuts through subsidies from ACT Housing but these would now be reduced by $3.6 million over three years. ''The ACT budget is facing a large range of pressures right across the spectrum, whether it's the growth in the health budget or the pressures to improve the ACTION bus service, all the city services you can name … we can't just replace that Commonwealth funding,'' he said.
The ACT government this week re-signed a different, continuing matched funding agreement with the Commonwealth for the next 12 months.
ACT Opposition Leader Jeremy Hanson said it was ironic that the Greens minister, who was advocating a billion-dollar social housing policy, was now cutting money for the homeless.
ACT Council of Social Services director Susan Helyar said services for women would be at most risk from the cuts.