Many councils across the state are already identifying sites that could be used in the state government's $5.3 billion "Big Housing Build" drive, which is designed to increase the supply of housing in the state and act as a stimulus to the economy.

Around $80 million of those funds has been earmarked for Ballarat, part of around 25 per cent of the total which is being directed to regional areas.

Ballarat has been earmarked as a "priority" local government area.

While some councils have already earmarked sites and announced them publicly, that process is currently underway in Ballarat.

A council spokesperson said on Friday that potential locations for social housing were being reviewed.

"In recognition of the growing housing affordability challenges facing Ballarat, Council has proactively been planning for this investment."

The spokesperson said a consultant had been taken on to engage with Homes Victoria, local housing providers, key stakeholders and other local governments "to scope this opportunity and consider options to make the most of this investment and leverage strategic outcomes for Council and community."

A diverse and affordable housing strategy has also been drafted, they said.

Since the onset of the pandemic, the social housing shortage has grown more acute in Ballarat. In the Central Highlands area in December 2019, there were 1,167 applicants on the housing register for priority access social housing.

By the end of December 2020, that number had increased by almost 20 per cent to 1,391, according to data supplied by Housing Vic, now part of the new Department of Families, Fairness and Housing.

There were a total of 2,186 applicants on the register in the region compared to 1,882 at the same time last year.

Data published by the Australian Institute of Health and Welfare (AIHW) also suggests Victoria has one the most severe housing shortages in the country.

The AIHW Specialist Homelessness Services report indicates the housing shortage in Ballarat is more chronic than average.

The report, which was current up to the end of June last year, showed there were 115,300 people who requested housing help in Victoria, compared to 70,400 in New South Wales.

In Ballarat in the last financial year, there were 201 people from every 10,000 seeking help from housing services, compared to an average of 175 for the state.

The exact number of residences in Ballarat earmarked for the Big Housing Build has not yet been confirmed.

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