The warning from the Victorian Planning Authority, in a report to be released on Monday, is based on data showing a dramatic increase in the number of Victorians renting in recent years.

Post-war Australia made an ideal of home-ownership, the "great Australian dream". In Victoria, home ownership rates remained as high as 75 per cent of households in the 1990s and into the 2000s.

But that rate is starting to slide fast and comes as Victoria, and Melbourne, undergoes dramatic change.

An analysis by The Sunday Age indicates that home ownership is likely to fall to between 65 to 68 per cent of households in Victoria when census data is released later this month. Overall home ownership rates in Australia are now heading to levels last seen in the 1950s.

The planning authority report will also reveal record population growth in Victoria with 127,500 people added in the year to September 2016, increasing pressure on Melbourne's housing, transport and other services.

Phe Luxford has rented for 16 years, in the past often around St Kilda.

Now, in her 40s and with two small children, she has been pushed further out into the southern suburbs by rising rents.

"As a community we need to put a lid on as seeing houses as a means to a financial end rather than being a part of the society we live in," says Ms Luxford, who works part-time while her partner works full-time.

In the past five years, she has had to move four times and even had to do so just after the birth of her child after her landlord decided to sell.

"What is our community going to look like, how are our kids going to have certainty about what schools they go to," she says.

She can't ever imagine owning. "We are a bit stuck now."

At the 2011 Census, Victoria had a still high 70 per cent home ownership rate. New census data is to be released on June 27.

"It is highly likely that the percentage of owner-occupier dwellings in Victoria will have fallen significantly," the authority's State of the State report says.

The number of active rental bonds in Victoria has risen by more than 30 per cent in the past five years, or by nearly 128,000, the report says. For every new rental only a net two new houses are built - a far lower rate than in the past.

In parts of Europe, long-term renting is common with home ownership rates in Germany and Switzerland both below 50 per cent. But the laws in parts of Europe are far more tenant-friendly offering great security in tenure and limits on rent increases.

In Victoria, the Residential Tenancies Act gives extensive powers for landlords to remove tenants, even for no stated reason.

The Andrews government has been reviewing the Act for two years but is yet to make substantial changes to it.

The report comes as rents rise sharply, at twice the rate of inflation, rising 3.8 per cent in Melbourne in 2016. House prices have blown out by 40 per cent since 2012, according to the Bureau of Statistics.

The Council to Homeless Persons policy manager Kate Colvin said the system was failing.

"What this is, is a profound failure of tax policy to deliver the outcomes that we need," she said. "We give millions to investors to help them outbid prospective home owners."

As higher-income people rented longer, this created more competition and squeezed low-income people out of the market, she said.

Ms Colvin said there was a lack of housing for low-income people in both the private market while social and public housing was just 3.5 per cent of total housing stock. This has been steadily falling over time due to under-investment by governments.

"The outcome of that is a devastating struggle for people either to afford the place they are in, or to move somewhere they can live. Inevitably, a large number of people become homeless."

Trevor Brown had to stay living in his van as it was so hard to find a place to live in the private rental market.

Even when he pooled enough resources with some friends, the door was shut. They applied to rent about 80 houses some years ago with not even a reply. All three were on welfare and had limited means.

"That was the thing, no one wanted to know us."

It meant he lived in his van for years longer. Public housing was not an option as he was told he may have to wait 15 years for a place.

Now in a private rental in Melbourne's north, making ends meet on Austudy is still a struggle.

"You pay rent, utility bills, throw some money in Myki and try and buy some food and there's sweet FA left."

The Tenants Union of Victoria's Devon LaSalle said due to higher rents and competition more and more low income renters were being pushed further away from the city, where the jobs and infrastructure are.

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