To receive the funding, non-government organisations are invited to develop an innovative model of supported accommodation.
Minister for Social Housing Pru Goward said the government recognises that some people, including many sleeping rough, have complex needs which require tailored additional support.
“This is why we are inviting the NGO sector to provide supported accommodation,” Ms Goward said.
“In addition to a roof over their heads, thousands more people in NSW will be linked with vital support services that give them the best chance of breaking the cycle of homelessness.”
The government provides temporary accommodation to any person in NSW at imminent risk or experiencing homelessness, usually in low-cost motels or caravan parks.
Nearly 25,000 people used the temporary accommodation service in 2016-17.