Under the change, the federal government will provide a roughly $6000 top-up payment to some people on Youth Allowance and the Indigenous ABSTUDY payment, making them a more appealing tenant for community housing providers.
The scheme is expected to cost $60 million over the next four years, ramping up the number of people supported from 2325 at the start of 2027, to more than 4000 by the 2029/30 financial year.
The two support payments are less generous than other welfare offerings like JobSeeker or the aged pension.
Because the cost of community housing is generally scaled relative to a person's income, providers will often choose to rent a room to a pensioner - who will pay more - instead of a young person.
The federal government says the measure will help tackle youth homelessness, with young people aged 19 to 24 currently experiencing higher homelessness rates than any other aged cohort.
Housing would be a big focus of the Albanese government's fifth budget, Treasurer Jim Chalmers said in a statement.
"The budget acknowledges that the challenges in housing begin with supply but don't end there, that's why we are taking other responsible steps including these efforts to address youth homelessness," he said.
"This is another element of the substantial housing package that we'll announce on Tuesday night."
Dr Chalmers is also expected to unveil changes aimed at reducing the power of investors in the housing market to give young people a leg up, including a tightening of negative gearing and capital gains tax concessions.
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