Rents will skyrocket by up to $150 a week for hundreds of Wollongong public housing tenants as part of a strategy to encourage them into the private rental market and free up housing stock for the most needy.
Housing NSW will next week send letters outlining the rent hikes to 350 higher-earning Wollongong tenants and thousands more statewide.
The tenants met eligibility requirements when they moved in to their properties, but have since increased their household incomes.
Meanwhile, waiting periods for public housing have grown to more than 10 years across much of the region.
A spokesman for Housing NSW said Wollongong housed a higher than average level of market renters - public housing tenants whose income was too high to qualify them for a subsidy.
The strategy was about restoring equity to the system by making more housing available to the most needy, in line with suggestions made by the Auditor-General in a report earlier this year.
"The majority [of Wollongong market renters] are paying up to $50 a week less than they would in the private sector, but some are paying as much as $150 per week less," the spokesman said.
"The increases that will come in this year will bring these rents more in line with comparable rental properties."
In his report, the Auditor-General suggested the public housing system be more responsive to the changing circumstances of its tenants, with greater focus on the 55,000 people on public housing waiting lists.
Waiting times are more than 10 years in Shellharbour. In Wollongong, waits are two to five years for a studio or one bedroom and five to 10 years for bigger homes.
Kiama is the only Illawarra location where waits are less than two years, but only for studios.
All public housing properties are assigned a market rent, but the majority of tenants - about 90 per cent statewide - do not pay this because their low income qualifies them for a subsidised rental rate of 25 to 30 per cent of their income. Higher-earning tenants are charged the full market rent, which can still be significantly cheaper than renting in the private market.
To be eligible for public housing, household income must be less than $775 for a couple and $560 for a single adult. Allowable income increases by $275 when the household includes a child, and by another $90 for each additional child.