Plans for new housing was just a "drop in the ocean" and would still leave people sleeping on the streets, Katherine's Salvation Army said.
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The Territory Labor Government is set to spend $4 million building 16 houses, eight social and eight affordable, in Katherine to help allievate a housing shortage during an economic boom in the region.
Katherine's Salvation Army Senior Case Manager Dean Jones said the funding was a step in the right direction, but more needed to be done to keep people off the streets.
"It's wonderful news. We have been pushing for this for a long time but I really hope this is just the beginning," Mr Jones said.
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"This is just a drop in the ocean, a great starting point. Eight social houses doesn't seem like much but it is a start."
Mr Jones said on average the Salvos supported up to 100 people and half of those didn't have housing.
"On average we have 50-100 people that we support and half of them don't have housing and would benefit from more available social housing," he said.
"People continue to sleep on the streets. There is nowhere to put people in housing so we would try and accommodate them in short term accommodation, but there is also no short term accommodation available."
Mr Jones said they had put Band-Aids on the situation to help the homeless as best as they could.
"The situation is extremely dire. There are no safe spaces for the homeless to sleep, they're all sleeping rough," he said.
"We have offered overnight packs and vouchers to buy swags or sleeping bags, because unfortunately we cannot afford to put people in hotels and motels. It's too expensive and there is nowhere to refer people too.
"We have been putting Band-Aids on things, because there was no options to do anything else. So hopefully with this announcement we might be able to work on getting people into accommodation and supporting them."
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Mr Jones said he would like to see more transient accommodation facilities in Katherine.
"We need more short term and transient accommodation like Darwin, Alice Springs and Tennant Creek," he said.
"These people have family ties here and can't just relocate and unfortunately their family housing is already overcrowded so they cannot stay with them.
"Most people come here from remote communities around Katherine, for medical and other reasons. Also at the moment they cannot go back to community because of the Biosecurity Zones and they have no where to stay.
Minister for Territory Families and Urban Housing, Kate Worden visited Katherine last week and witnessed the situation first hand.
"She met with us and saw the situation here in Katherine. We discussed the support we would like to see from the government, which did include housing," Mr Jones said.
"I think this housing announcement was already in the pipeline and was not a result of the Minister's visit, however we still welcome this announcement and any support we can receive to help those here in Katherine."
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