Two “uninhabitable” towers in Melbourne’s inner north will make way for Australia’s first social housing “accelerator” project to boost supply amid a national crisis.

Prime Minister Anthony Albanese joined Victorian Premier Daniel Andrews on Tuesday to announce the demolition of Carlton’s vacant red-brick towers to make way for a new development.

The 231-home project will make up a large chunk of the 769 dwellings to be built as part of Victoria’s share of a $2 billion social housing package announced by the federal government in June.

All former tower residents will be invited to live in the new homes, along with tenants from other public housing projects under development.

Construction is slated to begin in mid-2024 and be completed in 2028, with the cost of the build subject to a bidding process but contained within Victoria’s $496 million funding share.

The Prime Minister described the 196-home towers as uninhabitable and impossible to upgrade.

“This is a win, win, win for Victoria,” he said overlooking the towers on top of the nearby Royal Exhibition Building.

Melbourne is forecast to overtake Sydney as the nation’s largest city early next decade.

Infrastructure Victoria has warned Melbourne needs to build 44,000 new homes a year to accommodate an extra 3.1 million people by 2051.

“We can’t keep just going out. We have to go up and out,” Mr Andrews said.

Opposition Leader John Pesutto pointed out almost 68,000 people were languishing on Victoria’s public housing waiting list as of March.

“If it’s an accelerator project it’s certainly moving at a snail’s pace,” he said.

Mr Albanese suggested all of the new 769 new homes would be set aside as public housing but the Victorian Public Tenants Association is seeking clarification on how they will be managed.

“It will be extremely disappointing if the management of these tenancies is once again referred to the community housing sector,” association chief executive Katelyn Butterss said.

Council to Homeless Persons chief executive Deborah Di Natale said the project was a step in the right direction but fewer than 800 homes would “barely make a dent” in the crisis.

Victoria still needs thousands of new social housing properties a year to meet demand, Victorian Council of Social Service interim chief executive Juanita Pope said.

Community Housing Industry Association Victoria says the state is lagging behind the rest of the country in social housing supply, despite its push to build 12,000 new dwellings as part of a $5.3 billion investment.

“Our not-for-profit sector can stretch taxpayer dollars further and deliver more homes at less cost to the government,” acting chief executive Jess Pomeroy said.

Mr Andrews and cabinet ministers are separately on the verge of endorsing policies developed as part of the government’s long-awaited housing statement.

The changes could include an Australian-first levy on short-term accommodation bookings with providers such as Airbnb and curtailing council powers to fast-track development approvals.

-AAP