Decades of skyrocketing house prices have driven the highest proportion of Australians into the private rental market since 1960, with up to 7 per cent of poor households paying three-quarters of their income to landlords.

In a report that found the private rental market worked well for most people, the Productivity Commission said the entire market was changing rapidly, in part due to the surge in house prices that was leaving families, the disabled and those over 65 most at risk.

Families are increasingly being forced into the private rental market, the Productivity Commission has found.

Between the end of World War II and the mid-1980s, the proportion of Australians renting a home fell sharply on the back of a nationwide building boom and strong wages growth for low and middle-income earners. But over the past 30 years, the proportion of people who rent has grown, accelerating over the past two decades in line with soaring house prices.

The commission found there were now at least 2.1 million households, covering 6.3 million people, in the rental market, which was once considered a short-term housing choice for young people.