Pressures on low-income earners remain acute but rental affordability has stabilised, according to a report published by consultancy firm SGS Economics and Planning and affordable housing peak body National Shelter on Monday.
The rental affordability index, which compares rent prices with incomes, was steady in the past year after rapid declines to record-low levels since 2021.
While rentals remained unaffordable in many parts of Australia, including Sydney and Perth where the average household was spending at least 30 per cent of its income on rent, green shoots were emerging, National Shelter chair John Engeler said.
For the first time in years, social and affordable housing stock appears to be increasing.
"The federal government has made vital steps towards turning this situation around, including delivering the Housing Australia Future Fund and committing to a Better Deal for Renters at national cabinet," Mr Engeler said.
"We're already seeing the delivery of hundreds of homes under the HAFF, with thousands in the pipeline which will take pressure off the private rental market.
"We must now build on this momentum, including by expanding the construction of build-to-rent housing, to further improve affordability for renters."
Federal government initiatives, such as the Housing Australia Future Fund and Social Housing Accelerator, deliver 11,000 homes a year.
But the independent national housing agency, Housing Australia, estimated in 2021 that to plug the shortfall, 44,500 social and affordable homes would need to be delivered annually over a 20-year period.
The report makes the case that not only is building more social and affordable homes better for struggling renters, it's also better for the economy.
As the federal government attempts to lift productivity growth from 60-year lows, that task was being hampered by unaffordable rents because it made it harder for employers to attract workers.
"From cafes and hotels to hospitals and childcare centres, businesses across Australia are struggling to find staff because there's nowhere affordable for them to live nearby," said Housing All Australians executive director Robert Pradolin.
"Housing that people can afford is absolutely critical economic infrastructure and without it our national prosperity and productivity are being held back."
The report recommends innovative ways to partner with the private sector to deliver new affordable housing, given the limited funds available to the government.
Housing Minister Clare O'Neil pointed to Swift Walk in Kensington, Victoria as an example of a project being delivered with HAFF and private sector financing, that would result in 272 social and affordable homes.
"Our government is building homes - for key workers, for families, for Australians who need extra help and support," she said.
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