There were 37,779 people experiencing persistent homelessness in 2023/24 - an increase of 25 per cent from five years earlier - the Productivity Commission found in its yearly report on government services.
The proportion of people facing persistent homelessness, defined as people who use homelessness services for more than seven months over a 24-month period, climbed to 22.5 per cent.
They were grim findings, Homelessness Australia chief executive Kate Colvin said.
"More Australians than ever are trapped in long-term homelessness and even those who find housing are struggling to maintain it without adequate support," she said.
The report showed more than 10 per cent of people - almost 15,000 individuals - who found housing through homelessness services later ended up without a home.
Almost 38,000 people experienced persistent homelessness in 2023/24. (Darren England/AAP PHOTOS)
Despite annual funding for homelessness services rising 26 per cent to $1.5 billion since 2019/20, an average of 208 people were still turned away each day.
"Over the year, that amounts to 53,292 people - one in three of those needing accommodation - who received no housing assistance at all," Ms Colvin said.
That highlighted the need for increased investment, especially in long-term support services.
The report showed when services were made available to clients at risk of being homeless, they successfully prevented homelessness in 80.9 per cent of cases.
"The high success rate in preventing homelessness shows that early intervention is effective," Ms Colvin said.
"With sustained investment in support services, we can prevent people cycling back into homelessness and lay down the foundations of healthy, functional lives."
The rise in long-term homelessness has occurred alongside the cost of housing, including rents, new home purchases and utilities, surging by almost a quarter since before the pandemic, according to data from the Australian Bureau of Statistics.
While government rent assistance has increased in recent years, two in five recipients were still suffering from rental stress, the report revealed.
Almost 42 per cent of Commonwealth Rent Assistance recipients spent more than 30 per cent of their income on rent, emphasising the need to increase Centrelink payments for people on the lowest incomes, Everybody's Home spokesperson Maiy Azize said.
"For those who can get it, Commonwealth Rent Assistance can take the edge off rents," she said.
"But the payment is unfairly designed - the people who need the most help get the least benefit, and many people aren't eligible for any help at all."
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