Northern Territory Chief Minister Michael Gunner said he was forced to kick responsibility for housing in indigenous communities back to the Commonwealth because it had broken its promise to provide funding.
Mr Gunner informed Prime Minister Scott Morrison in a terse letter on Monday that he would not renew expiring remote housing leases in 44 of the NT's 73 communities, forcing the federal government to take over.
The letter was responding to the PM's own on Friday, urging Mr Gunner not to break the leases and warning him that he was legally responsible for housing and would cause distress to Aboriginal Territorians if he acted.
The NT's dramatic move follows an acrimonious fortnight, with Mr Gunner and Indigenous Affairs Minister Nigel Scullion publicly accusing each other of reneging on a $1.1 billion, five-year deal to jointly fund the housing program signed nearly nine months ago.
The Australian government was yet to contribute $1 of its promised $550 million while the NT had built or repaired more than 1300 remote houses since 2016, and was on track to reach 2500 by June, Mr Gunner said.
"There is absolutely no sign the Commonwealth is going to be good for any of their $550 million," he told reporters on Tuesday.
"By them actually resuming control of these leases they are then directly responsible for themselves acquitting that $550 million.
"I don't believe they will break their promise to themselves, they don't want to give us the money.
The flow-on effects of overcrowding are poor physical and mental health and exacerbated social tensions, providing barriers to schooling and participation in the workforce, Central Land Council chairman Francis Kelly says.
NT Labor says another 15,500 homes, costing nearly $3 billion, are needed in the next decade, with the Territory government saying it will honour its commitment to $1.1 billion over 10 years.
NT Housing Minister Gerry McCarthy said the NT would continue to build and repair houses in the 29 communities it still leased and it expected the Commonwealth to separately spend $550 million in the other 44.
He blamed Senator Scullion who had "shifted the goalposts" and made the federal funds conditional on unreasonable demands such as an Aboriginal employment rate of 70 per cent for work and the NT's four land councils having control over spending.
The NT's Country Liberal Opposition Leader Gary Higgins backed the federal government, saying they had a right to a say over how such a large amount of taxpayers' money was spent.
The CEO of the Tangentyere Council, Walter Shaw, which runs housing in indigenous town camps, said "both governments are acting disgracefully, showing ... no understanding of the impact this game they are playing is having".
