The NSW government has axed the Newcastle Mines Grouting Fund in a decision industry representatives say could jeopardise future housing projects in the city.
The government is winding up the fund, which provides money to developers and investors for unknown costs to fill underground mine voids. The funding is set above a designated cap depending on the area.
The recent state budget reduced the fund from $11 million to $6 million, which will fund approved claims but no future applications will be accepted.
The government said the uncommitted $5 million would be redirected to "key government priorities", including housing, critical infrastructure, renewable energy and essential services.
The fund was established in 2015 after advocacy from the Property Council of NSW. Former Property Council chair Neil Petherbridge said the axing of the program was a "dumb decision".
Mr Petherbridge, who is Northern NSW business manager for Northrop Consulting Engineers, said the fund had not paid out a large sum of money, but it gave developers assurance to finance their projects.
"The reason it was needed was because when people were going to the bank to try and finance the developments, they couldn't quantify the cost of the mine grouting works," he said.
"As a result the banks would say 'well if it's the higher number then the project's not feasible and doesn't work. I'm not lending any money'.
"So a lot of projects didn't get off the ground for a very long time.
"The mines grouting fund caps the maximum spend per square metre.
"It has very much helped small projects because often you've got to spend nearly the same amount of money on grouting [as larger projects], even though your site might only be 600 square meters and you're putting eight units on it.
"I've already spoken to a number of developers and some of the projects they've already put applications in, but the ones that they haven't, they're tossing up whether they're going to proceed or not.
"I wouldn't be a little surprised if there's a fairly large number of them that won't proceed."
The fund supported eight projects in the Newcastle CBD and funding was granted to three of those projects to a total value of $1,173,377.
A fourth project has been completed - the Newcastle Art Gallery expansion project, however the funding has not yet been paid.
Property Council's Hunter regional director Anita Hugo said the "poor decision" would create uncertainty and investments would move elsewhere.
"This fund was established in 2015 from the Hunter Infrastructure and Investment Fund and has since stimulated at least $3 billion worth of investment in the city," Ms Hugo said.
"The fund was established to fix a market failure, which was to remove the uncertainty in the likely cost of mine remediation works to allow development projects to access finance. This is a long-term measure to put investment in the Hunter on a level playing field with other regions.
"Without a Newcastle Mines Grouting Fund, the Hunter will continue to miss out on investment and housing supply that we so desperately need in the region."
Mr Petherbridge said it was exceptionally disappointing after the budget offered "nothing" to the Hunter region.
"You've got 2.7 billion in royalties taken from the mining industry," he said. "Resources for Regions was scrapped. The Williamtown SAP was scrapped. This is now being scrapped and we've got four ministers in government.
"I just think it's disgraceful."
The federal government committed $10 million to a Lake Macquarie Grouting Fund, which is not affected by the changes.
