The "conventional wisdom" that low income earners don't stand to benefit from building more housing has been tackled head-on in a new report.

The Grattan Institute, a public policy think tank, has railed against a view it believes is shared by many affordable housing advocates about who stands to gain by boosting the supply of market-rent housing.

One common argument is that most new housing being built in Australia is too expensive for low and middle income earners, and adding new stock won't lower rents paid by the poorest Australians, unless they're explicitly built to house them.

"This conventional wisdom is wrong," the Grattan Institute argues in a report released on Friday, arguing it is based on flawed research and at odds with international literature.

The think tank is concerned people are using faulty research to argue government should focus on increasing subsidies for affordable housing, rather than tackling "politically difficult" planning reforms.

"This would be misguided policy, based on misguided analysis," the report said.

The Grattan Institute said housing supply was not the only solution to making housing more affordable for low income earners, and larger subsidies were needed to help people cope with rising housing costs.

"But without more supply for everyone, housing won't become much more affordable, especially for low-income earners," the report said.