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Uniting acting general manager North and Western Victoria Jerry Ham said a proper upgrade for the heritage building would have cost multiple millions of dollars.
Uniting had been seeking funds for Reid's Guest House for months without any luck.
Mr Ham said the program wasn't supported by state or federal funding.
In 2023, Uniting supported 3434 people in Ballarat with homelessness and housing support.
Mr Ham said it was a "worsening crisis" and "looking to only get worse."
Mr Ham said since the house reopened after a fire two years ago, Uniting have sought support from a "number of avenues to find funding".
"We are looking at a not-fit-for-purpose building with a heritage listing," he said.
"In it's current state it does meet standards such as disability access and right right number of toilers, showers or kitchens for the number of residents that live there."
Mr Ham said there were currently 25 people in the house and Uniting was working with each person to find suitable shelter.
"It'll be a few months," he said.
"People could go to a range of different options, some might be suitable for private rental accommodation, some are on the Victorian Housing Registers, some could go to supported residential services."
Mr Ham said the house will shut its doors late August to early September.
Uniting have owned Reid's Guest House for 21-years, Mr Ham said over the two decades, the organisation would have put "millions" into upgrades over that time but the "tough decision" needed to be made.
"It's just not feasible," he said,
"We need to reinvest those funds into more suitable and affordable housing within the Ballarat region."
Mr Ham said while one building wasn't the answer to responding to the housing and homelessness crisis, Uniting had other programs like Street 2 Home and Private Rental Assistance Program.
"We're doing everything we can but we are seeing a worsening crisis and where it's not just one building, one program, one facility that's going to answer this problem," he said.
"We need to continue to work hard in that space. And we continue need to continue to advocate for the one long term solution that is going to solve the housing crisis which is an increased supply of social and affordable housing."
One previous user of Reid's Guest House said she didn't know where she would be if not being able to have housing there.
"I lived there twice when I was homeless and living in Ballarat. I don't know where I would be if I hadn't had Reid's to go to," she said.
"I waited for my public housing unit for four-and- half years and I was priority."
The person also said the monthly power bills were substantial.
Earlier:
Reid's Guest House on Lydiard Street will close due to "ongoing costs", removing a key facility for people experiencing homelessness.
Uniting, which has owned the building for 21 years, runs the site, which provides transitional housing for people in the Ballarat and central highlands region experiencing homelessness, providing stays of up to 60 nights in one of the 15 rooms.
The Courier understands residents were informed earlier this week.
The building reopened in November 2022 after it closed for repairs from a fire.
City of Ballarat has had an increase of people living homeless over cost-of-living issues and a housing shortage in the past 18-months.
Community services have reported worked beyond their means and still unable to support all the people who reach out for help.
Uniting acting general manager North and Western Victoria Jerry Ham said upgrades to the house and maintenance costs were the tipping factor, saying it was "no longer fit-for-purpose".
The dwelling has poor heating and a lack of accessibility for people with mobility challenges.
In an effort to combat this loss, Uniting has started managing 14 fully refurbished units in Lyons Street available to people on the Victorian Housing Register and reported other projects to increase local access to affordable and social housing.
Mr Ham said Uniting will be "working hard" over the coming months to find accommodation for the people currently at Reid's Guest House.
It is estimated about 50 to 80 people are sleeping rough every night in Ballarat, but hundreds more are in unstable housing, or couch surfing.
A lack of mental health supports has already been called out as another issue facing at-risk people.
Thousands of people in Ballarat are on public housing waitlists and state-wide there are over 60,000 people waiting for housing.
In 2023 alone, Reid's Guest House sheltered 155 people.
"We will use the proceeds from the sale of the Reid's building to invest in Uniting's community housing options across the Ballarat region," Mr Ham said.
Volunteer-run services like the Shower Bus noted in 2023 more people were in need of basics, like soap and toothpaste as the cost-of living increase was hurting people's everyday needs.
MORE TO COME