Health Minister Katy Gallagher opened the centre yesterday. It will cost almost $1million a year to run.

The first residents are expected to arrive on Monday.

The five-bedroom home, also known as a ''step-up and step-down'' centre, will allow people recovering from mental illness to make the transition back into the community. They can also receive treatment if their health deteriorates, allowing them to shorten or avoid hospital stays.

The project has been two years in the making and is a collaboration between ACT Health and the Mental Illness Fellowship of Victoria, which has set up similar homes in Victoria.

Residents can stay for up to three months while they receive treatment and will be able to come and go freely. The centre will employ nine staff and one mental health worker will stay in the house every night.

The Mental Illness Fellowship of Victoria's rehabilitation manager, Laura Collister, said the home would enable people to recover from mental illness without losing their links to their community, family and friends.

''You go into a psychiatric hospital and you're dislocated from your normal life, you obviously don't go to work and maybe your family and friends don't want to visit because it's a pretty horrid environment to be in, you lose contact with your clubs that you might be part of,'' she said.

Ms Collister said the home would give patients control over their environment and the ability to choose privacy or social interaction.

''For somebody to be able to continue to cook their own meals or get support to do that, and continue on their normal routines is really critical to their recovery,'' she said.

Ms Gallagher said the residential centres were effective and cheaper than providing hospital care for mental health patients. ''Somewhere like this is a much more supportive environment and, for the dollar, a cheaper environment.''