Warrnambool City Council should consider investing in housing to address the city's rental shortage, according to councillor Ben Blain.
Cr Blain said he believed a lack of rentals was "holding Warrnambool back".
"It's holding back our economy because we can't find workers because they can't get housing," he said.
Cr Blain said council was aware a lack of housing was an issue across the state but he believed it needed to do more to address the issue.
"At this point in time housing is one of the city's biggest issues," he said.
"Something we should be looking at is council investing in housing to rent out."
Cr Blain said the houses could be rented out at "market rate" to allow the city to grow.
"I think we need to lobby hard to streamline planning but also look at possibly providing housing for workers in the city.
"Without enough housing, business and economic growth stalls."
Cr Blain said attracting new workers was one benefit of investing in housing and providing additional housing for young people to be able to rent when they left home was another.
He said he was also concerned about a lack of affordable housing in the city.
The Census shows the number of people paying more than 30 per cent of their income on rent each week had increased from 11 per cent in 2016 to 30 per cent in 2021.
Cr Blain said people were struggling to make ends meet due to the "stagnation of wage growth, rising living costs, increased rent and fuel prices".
A resident at Catalina Caravan Park in Port Fairy, which is closing in August, said a number of the long-term tenants were struggling to find a place to live.
The man, who asked not to be named, said he had been on the list to secure public housing for more than three decades.
He said he had secured a rental, but was concerned he would struggle to cover the cost of rent.
The man said he paid $500 a fortnight to live at the park but would now be forced to pay $900 a fortnight.
"It's a home but whether I will be able to stay there is another thing because the rent is high," he said.
Research released by the Australian Institute of Health and Welfare showed the number of social housing in Victoria had declined.
It also found one-in-three renters paid more than 30 per cent of their income on rent.
Council to Homeless Persons chief executive officer Jenny Smith said the latest data highlighted the urgent need for the state and federal governments to lift social housing numbers.
"Victoria needs 6000 new homes a year for the next decade to address the shortage in social housing," Ms Smith said.
She said the state's rental crisis was due to a lack of affordable rentals and social housing.
"The private rental market can't and won't fix that, so we need government to step in and provide homes."
The state government revealed plans last week for two new social housing properties in Crawley Street as part of a $25 million investment in Warrnambool.
"The Big Housing Build is investing $1.25 billion in regional areas and we have already exceeded our minimum investment guarantee of $25 million for Warrnambool," a state government spokeswoman said.
"So far, we have committed $29 million to build 95 homes, creating 267 jobs - with more projects on the way.
"Homes Victoria is seeking council approval to build two houses at 41 Crawley Street, while redevelopment options are being explored for 45 Crawley Street."
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