Demand has far outstripped supply in the City of Greater Bendigo and that challenge could intensify in years to come.

More than 2600 people are currently waiting for social housing alone in greater Bendigo, with 2400 already occupied.

Other people are being squeezed out of rental markets that have shrunk in recent years.

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The rental vacancy rate alone has dropped from 2.5 per cent in 2016 to 0.7 per cent in 2021 and rising costs have prompted support agencies to warn vulnerable people were being caught up in vicious cycles of poverty.

Those sorts of pressures have now prompted councillors to vote through plans doubling the supply of social housing to meet a demand of 10 per cent by 2036.

The new policy could also help make housing more affordable and encourage updates to existing rentals.

"The majority of rental properties were built prior to the current building regulations (commenced 1993), now require upgrading and are running below current energy efficiency standards," council officers told elected officials in a briefing ahead of Monday night's vote.

That had helped exacerbate people's stress during the pandemic.

At the height of the 2020 crisis more than 80 per cent of people surveyed by the council said it was getting harder to pay for basic living expenses like food, heating and mortgages.

A recent Australian Institute of Family Studies paper found many people who dipped into superannuation early spent the money on rents, mortgages and household expenditure.

The council's housing ambitions will likely be bolstered by a recently announced state government push to build 60,000 new dwellings.

Bendigo alone is expected to receive $85 million from the fund and could vie for some of the $485 million pie of money that remains unallocated to specific areas.

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The new policy includes a raft of ideas that the council will advocate to other levels of government and the housing industry on as well as investigations into things in its power to change.

The council will consider waiving fees for social housing agencies building new dwellings as well as discount rates for certain new dwellings.

Councillor Dave Fagg said there was some limit on the role the city could play.

"Council is not a housing developer," he said.

"But this plan is helpful in that it clarifies council's role in enabling the supply of affordable housing."

One councillor believed more could be done even as she welcomed the plan.

Andrea Metcalf said the council should also consider advocating for "rent to buy" schemes.

She said many people struggled to both pay rent and save for dwellings.

"They can show they can pay a loan but can't qualify for one. I think there needs to be broader thinking on this," Cr Metcalf said.

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