Greg Lacey and his family were foster carers for three years but the mounting pressure on carers felt all-consuming.

He left the system two years ago after experiencing burnout and struggling to balance the often complex needs of children under his care with his own two daughters.

"It was thoroughly enjoyable but very draining as well," Mr Lacey said.

"We're only foster carers — we're not trained psychologists or social workers."

New data from the Foster Care Association of Victoria (FCAV) reveals a decline in foster carers in Victoria since 2020, with more people leaving the system than entering.

It means some foster carers are being asked by their agencies to take on additional children and are receiving more requests to help other carers with short-term respite care.

"As soon as [one child] left, we'd get another call after a day or two to have another kid placed with us," Mr Lacey, of Geelong, said.

This year, the number of active carer households in Victoria dropped by 5.2 per cent to 1,683.

The decline has been continuing since 2020, when there were 1,885 active carer households.

The number of households completing accreditation is also decreasing, with new carers failing to replace those leaving the system.

This year the number of new carer households receiving accreditation fell by 18 per cent compared to last year.

Data from the FCAV's Carer Census revealed more than 60 per cent of carers cited financial strain as one of their three biggest challenges in their role.

Mr Lacey said holding on to employment while supporting foster children was "very difficult" with those who had high needs and needed to be taken to various and frequent appointments.

"I think anyone trying to hold down a full-time job and raise their own kids and look after all the normal day-to-day things that happen in a household," he said.

"Putting a high needs foster child into the household as well without additional financial support would be pretty unreasonable."

The fortnightly base rate for Victorian carers with children aged between 0 and 4 years old is nearly $200 below the highest paying state, the ACT.

The gap widens to nearly $250 for the next age group.

Kids ending up in unstable housing

FCAV CEO Samantha Hauge said Victoria was the outlier in Australia and it was critical for the state to raise the allowance.

"Foster carers in Victoria are doing it tough. We know with the cost-of-living crisis and yet we have such a low care allowance coupled with an incredibly low indexation rate," she said.

"The real cost of caring for a child is increasing and yet the real value of the care allowance is decreasing."

Ms Hauge said the trend in foster carer numbers declining was "alarming", with placement availability not meeting demand.

"Kids deserve to be in a loving, supportive, family environment where possible and without that the life trajectory for a child in residential care is clearly not as good as a child in foster care."

Victorian Legal Aid data from the three years to August 2022, shows 51.3 per cent of children in residential care were charged with a criminal offence within two years of being placed.

FCAV is calling on the government to increase the allowance, develop a carer retention and recruitment strategy, and streamline service delivery to remove red tape for carers accessing additional funding for children.

Opposition calls government 'disgraceful'

Shadow Minister for Child Protection Roma Britnell said it was "disgraceful" that the government had not increased the allowance in eight years.

"Every year the indexation is not even in line with CPI," she said.

Hundreds of foster carers were leaving the system each year, but the government continued to do the same thing while expecting different results, Ms Britnell said. 

A spokesperson for the Department of Families, Fairness and Housing said the government had committed $38.4 million over four years to improve home-based care for children.

"Our foster carers do a great job and we provide a range of supports to them, including the care allowance that's indexed annually, the care support help desk, respite, and additional funding," the spokesperson said.