“This will change lives - giving thousands of Victorians the security and stability of a home and tens of thousands of Victorians a job,” Premier Daniel Andrews said.

The building industry has been urging the government to invest in social housing,with Master Builders Association of Victoria CEO Rebecca Casson saying almost 30,000 Victorian building and construction workers had lost their jobs since March.

Ten per cent of the work on the major housing projects will be done by apprentices,cadets and trainees and hundreds of jobs will be created for women,Aboriginal Victorians,people with a disability and social-housing tenants through social procurement targets.

In an interview withThe Sunday Age,Housing Minister Richard Wynne said the government would work with social housing providers,the private sector and local government to deliver the housing.

“Without doubt this is the biggest commitment by any state government ever,” Mr Wynne said. “This makes a huge dent in the social housing waiting list.”

The first sites to be developed will be in West Heidelberg,Ascot Vale,Flemington,Hawthorn,Richmond and Ashburton.

Tenants of public housing are charged at no more than 25 per cent of their income and those in community housing,which is run by not-for-profit agencies,are charged no more than 30 per cent of their income.

Two thousand of the new social-housing homes will be allocated to people with mental illness,which accounts for a quarter of those on the priority waiting list.

Tenzin Laktso,who has post-traumatic stress disorder and cognitive depression,said public housing had made a huge difference to his life.

The 44-year-old has lived in public housing units since 2017. He spends 25 per cent of his disability pension on rent,which he says is manageable.

“Accommodation is the foundation for everything,for wellbeing,for going out and looking for jobs,” Mr Laktso said.

A new government agency,Homes Victoria,has been established to deliver and manage public housing.

It will spend $948 million spot purchasing properties,as well as in-progress or ready to build projects,where social and affordable housing is urgently needed as well as building on vacant sites the government already owns.

Combined with new housing from existing investments such as the controversial Public Housing Renewal program and Social Housing Growth Fund,construction of more than 15,800 new homes will begin over the next four years.

The state opposition has called on the government to make a record investment in social housing in the budget.

Opposition housing spokesman Tim Smith said:“A recent report by the Productivity Commission found the Andrews government spends less than half the national average per person on social housing.”

The Greens,which called for 100,000 new public-housing homes over the next decade,welcomed the billions being spent.

However,Greens acting housing spokesman Sam Hibbins said the party did not want a repeat of the $185 million public-housing renewal program in which nine public housing estates were sold to developers to rebuild with a mix of private apartments and social housing.

Mr Wynne toldThe Sunday Age the program would be reassessed when the nine estates were completed.

Property Council acting executive director Matthew Kandelaars said investment in social housing,delivered in partnership with private-sector innovation and expertise,would address both an urgent need for more social housing as well as economic activity and jobs.

“We want to see this activity happen as quickly as possible to get Victorians into work and into homes.”

Swinburne University professor of housing studies Terry Burke said the package was an important and welcome initiative.

"For the state to go it alone on this scale hasn't been replicated anywhere in Australia,"he said.

Professor Burke said the challenge was where to build the housing. “The obvious place to put them to maximise dollars is the outer suburbs,but you really want to put them in the middle and inner suburbs where people have access to services,particularly health and employment opportunities."

He said the government was also faced with the challenge of managing social housing as well as building it,especially when many tenants needed both shelter and support.

Victorian Council of Social Service CEO Emma King said the new social housing would change thousands of lives. “We already had a housing and homelessness crisis and COVID made it worse. This is such a massive help to solving the crisis while also helping the state move towards recovery.”