The future of a landmark social housing project lauded around the world remains under a cloud with the Victorian government refusing to commit to a new funding model amid a dip in overall homelessness funding in Tuesday’s state budget.

The Common Ground project in Melbourne’s Elizabeth Street, established with much fanfare in 2010 with the support of global construction scion Daniel Grollo, has been locked in tortuous negotiations with Housing Minister Wendy Lovell’s Department of Human Services for months, with no guarantee that current funding rates would be maintained or boosted.

The project provides secure discounted accommodation to over 100 tenants who had previously suffered from chronic homelessness. It has been regarded as cracking success in breaking the poverty cycle and has since been rolled out with Grollo’s support in NSW and Queensland.

Yarra Community Housing acts as the landlord while not-for-profit HomeGround provides vital allied health support services.

The previous Labor government committed over $30 million for the building and $1.8 million in seed funding for Common Ground’s initial first year bucket, with the project requiring $1.2 to $1.3 million in recurrent cash to remain operational.

Crikey understands discussions with Lovell’s Office of HousingĀ  have proven lengthy, with a potential sticking point being the provision of round-the-clock support staff. HomeGround receives about $10 million a year in total to run multiple projects across the state, including the Common Ground site.

Shadow Housing Minister Richard Wynne told Crikey this morning he “will be looking very carefully at this government’s commitment to this iconic homeless initiative.”

“Our serious concern is that in the Budget released on Tuesday that homeless assistance funding has decreased from $226.1 million to $222.8 million. This is a measure of Wendy Lovell’s real commitment to homelessness.”

Last year, Lovell put out a warm and fuzzy press release trumpeting the first anniversary of Common Ground and attesting to its success.

But Tuesday’s Budget allocated just $177.3 million in 2012-13 for “social housing” and a further $228.2 million for “housing support and homelessness assistance” for the coming financial year. There was no specific mention of either HomeGround or Common Ground and Lovell’s office did not respond to repeated requests to clarify the situation this morning.

In her official DHS budget press release issued on Tuesday, Lovell claimed the Budget would “enable the Government to assist around 77,000 households with long-term social housing, including public, Indigenous and community tenancies” and that “10,000 households would be assisted with short-term crisis and transitional accommodation while 36,000 households would have access to assistance to help them gain or maintain private rental accommodation.”

A spokesperson for Grollo’s global construction firm Grocon said it would be “disappointing if it funding was reduced or if Common Ground was defunded because we believe it is a good model and has been proven overseas to help break the cycle of homelessness”.

“Homelessness is a bipartisan issue and there should be a bipartisan approach,” the spokesperson said, adding they had been in touch with outgoing HomeGround CEO Stephen Nash to discuss progress on a new agreement.

A spokesperson for HomeGround, Daniel Scoullar, declined to talk details while the negotiations were under way, but confirmed that the was “currently in negotiation with the Office of Housing to determine an ongoing funding and service model for Elizabeth Street Common Ground”.

“We are confident that a positive outcome will be reached that will enable tenants to have security of tenure and continuing support and health services,” he said.

Scoullar said no tenant evictions would take place as a result.

A damning Auditor-General report on public housing released in March showed a chronic lack of funding meant public housing services would soon collapse under a debt mountain without a serious injection of funds, perhaps through rent increases from tenants.