The number of homeless in the Auckland CBD is rapidly increasing, the Auckland City Mission says.

Auckland CBD's only emergency accommodation has received a $2 million council boost to help house the homeless.

The James Liston Hostel in Freemans Bay will use the funds to renovate bathrooms and activity rooms and to increase capacity by five new beds to a total of 40 beds.

Auckland Council's finance and performance committee approved the funding on Thursday from the City Centre Targeted Rate.

Auckland Council's general manager of arts, community and events, Graham Bodman​, said the decision is vital to help get the homeless off the streets.

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"The James Liston Hostel ... is an essential service for some of our most vulnerable citizens," he said.

"The funding was identified as a practical pathway to help address Auckland's rough sleeping challenge and, importantly, to help raise the health, wellbeing and dignity of Aucklanders experiencing homelessness."

The funding means the hostel can transition almost 240 people into permanent accommodation over the next two years via a 12 week in-house support programme, followed by tenancy sustainment services.

James Liston Hostel board chairwoman Dame Diane Robertson said the funding will allow the hostel to reach its potential.

"At this point in time the hostel's ability to sustain positive outcomes for our clients is severely impacted by the current condition and capacity of our accommodation.

"More beds, better conditions and a more therapeutic setting will help us move people more quickly through our housing-first model, and with better results. We will be able to make the improvements with no impact on existing beds or service delivery during construction."

Mayor Len Brown said the funding was an important step to eliminate rough sleeping in Auckland's city centre in the next few years.

The latest annual Auckland City Mission street count, in May 2016, found 177 people sleeping rough within a 3km radius of the Sky Tower.

That was 30 more than the 147 people counted sleeping rough at the end of 2014.