A detailed analysis of homelessness data has shown thousands of Victorians looking for work are unable to afford to live in a house when trying to survive on government welfare.

Instead many people are squatting in high-rise car parks, cars, laneways and camping next to rivers.

"The stuff we are seeing now is major social problem and a major social failure," said Launch Housing chief executive Tony Keenan.

"It defies logic that you can be one of the wealthiest countries in the world and oversee a massive rise in people rough sleeping."

Research commissioned by the Andrews government for its upcoming rough sleeping strategy says that at least 7600 Victorians were recorded sleeping with no shelter or in an inadequate dwelling (such as a tent) in the year to June 2016.

And 13,617 people slept rough in the 19 months between July 2015 and January this year.

Contrary to popular perception, the vast majority of rough sleeping took place in hidden-away places outside the CBD.

About 39 per cent were living in rural and regional areas and 31 per cent in suburban Melbourne.

What has alarmed experts most is the large number of people unable to shelter while on Newstart payments or other welfare payments, which are meant to cover basic living expenses.

About 37.4 per cent of those who slept rough in Victoria since July 2015 were receiving Newstart.

The head of the government's rough sleeping strategy, Brotherhood of St Laurence executive director Tony Nicholson, said this was a significant finding.

"It is now a common occurrence that unemployed people who don't have the support of family or friends to fall back on are resorting to rough sleeping simply because of the inadequate level of Centrelink income," he said.

The struggle to survive on welfare comes as no surprise to PJay Streeton, 37, who lives in a squat in Docklands.

Mr Streeton said he lived in crisis accommodation, but was driven to exhaustion trying to make his fortnightly Centrelink payment of about $480 last.

"The majority of these crisis places around Melbourne cost $360 to $380 a fortnight," Mr Streeton said.

"By the time you pay rent and pay food and maybe a bill, you have got no money.

"I just couldn't get on top of anything.

"The price of living is going up, but the government doesn't want to put the price of your benefits up."

Victorian Housing Minister Martin Foley said he would use this Friday's meeting of the nation's housing and homeless ministers to attack the federal government plan to test 5000 new welfare recipients for drugs and alcohol.

"All it is about is whipping up anti-welfare recipients hysteria, not being serious about addressing homelessness," he said.

Men make up 66 per cent of rough sleepers in Victoria, but children and women are typically given priority for help because they are considered more vulnerable on the streets.

"Whenever you are faced with limited resources and you have to prioritise, some people will not receive the level of service they need," Mr Nicholson said.

Mr Keenan said being homeless by itself "won't get you into public housing".

"Public and social housing is heavily triaged - it's only the people of greatest need [that get access it to it]. The rest of Victorians rely on private rental, and private rentals have gone up excessively. That has resulted in a corresponding increase in people going into homelessness."

According to Anglicare's 2017 Rental Snapshot, less than 0.1 per cent of private rentals recently advertised in Victoria are affordable and appropriate for single people on Newstart or Youth Allowance.