The federal government hopes top-down reforms will allow homeless people to one day become homeowners.
But it argues that tightening negative gearing rules is not a solution to the nation's housing problem.
A new report shows Australia has fewer homeowners, but more renters and homeless people.
The number of homeless people has risen by four per cent since 2012, while the number of households that owned their own home outright slipped from 42 per cent in 1994-95 to 31 per cent in 2011-12.
Social Services Minister Scott Morrison acknowledges it's hard to buy a home these days, but believes the Australian dream isn't dead.
He says it's up to federal, state and local governments to work together and remove cost pressures in the housing market, so people can transition out of homelessness into stable accommodation and one day aspire to home ownership.
Mr Morrison dismissed suggestions that cracking down on negative gearing would help more people buy homes, saying such concessions helped increase the number of rental properties.
"I don't buy the rhetoric which is run by many commentators when it comes to negative gearing," he told reporters in Canberra on Thursday.
The Australian Institute of Health and Welfare report shows that about 254,000 people used specialist homelessness services in 2013-14, compared with 264,160 the previous period.
While most of them were from an indigenous background or young people aged 12-24, an alarming 17 per cent were under 12 years old.
The number of older Australians who own their own home is also on the decline.
While most people over 65 were homeowners, the proportion has dropped in the past decade and more are renting or still paying off a mortgage.
KEY FINDINGS:
* Households owning their homes with a mortgage rose from about 30 per cent in 1994-95 to 37 per cent in 2011-12.
* Households owning homes outright fell from 42 per cent in 1994-95 to 31 per cent in 2011-12.
* About 25 per cent of all households were renting from a private landlord in 2011-12, up from 18 per cent in 1994-95.
* The rise is partly attributed to the soaring cost of homes, discouraging renters from making the transition.
* More than 390,000 households were living in social housing in June 2014.
* There were more than 200,000 applicants on social housing waiting lists across Australia.
* Just over 105,200 people in Australia were considered to be homeless in 2011, up from 89,700 in 2006.
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