As many people struggle to secure housing in Sydney's expensive rental market, developers are building high-end "boarding houses" with rents as high as $500 per week by exploiting planning laws designed to help low-income earners find homes.

It comes amid a surge in the construction of boarding houses around Sydney, while councils say they are powerless to ensure the housing is actually affordable.

A 40-room boarding house in Avoca Street, Randwick, where rooms are currently advertised as "furnished designer studio" for lease for $500 per week, Credit:Darbs Darby (Andrew Darby)

"It's dividing the community," Randwick mayor Noel D'Souza said. "Developers are building these and the rents are not reflecting affordable housing."

In Randwick, more than 500 boarding house rooms have been built since the State Environmental Planning Policy for Affordable Rental Housing was implemented in July 2009.