Welfare and affordable housing groups are calling for increased commonwealth rental support as the payments fail to keep pace with surging rents.
New research reveals half the people receiving the supplement are still in rental stress, paying more than 30 per cent of their income on rent.
The Anglicare Australia study found assistance had fallen behind rising rents.
Last year, rents experienced double-digit annual growth as demand outstripped supply in regional and urban markets.
The report outlined some other shortcomings of the rent assistance program, including how it excludes some low-income renters.
For example, a single person on youth allowance must spend a third of their income on rent before they qualify, meaning they must prove they are in rental stress before they can get the payment.
Anglicare Australia executive director Kasy Chambers said only one in 10 people on JobSeeker or youth supplements were eligible for the commonwealth cash.
"We're calling for an increase to the payment so that it keeps up with soaring rents, and reforms so that more people in share houses and on low incomes are eligible," she said.
Productivity Commission data released on Tuesday showed the government spent three times as much on rent assistance than on social housing and homelessness programs combined.
Ms Chambers said rent assistance was introduced to save money on social housing.
"That approach has failed," she said, calling for more direct investment in social housing to cover the shortfall.
The Productivity Commission report also revealed an uptick in people seeking specialist homelessness services.
Mission Australia's Marion Bennett said some people were experiencing homelessness for the first time in their lives.
"Securing an affordable rental has become a near-impossible feat, right across the country," she said.
National housing campaign Everybody's Home called on the government to lift rent assistance by at least 50 per cent and improve access to those that needed it most.
The campaign also called for more investment in social housing.