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You need the latest drivers and possible GeForce experience installed.
Get the latest beta on both client and host; then go to Big Picture Mode and check that the Nvidia hardware encoder is enabled under the advanced host options of the In-Home Streaming settings.
Also, if you have a recent Intel CPU, you can enable the iGPU in the BIOS (and install drivers) to be able to use the Intel hardware encoder (as an option)
Does it depend on the game? I've tried streaming Two Worlds II, and the Steam client gives me 3 options to run it: the first is blank, the second is to launch using DX10 and the third is to run Two Worlds II 3D. When I select the (blank) first option, it uses DX9 and 4 threads of software encoding. If I select the DX10 version, the client readout says it's using "NVIFR" in the encoder, so it's using hardware encoding. But then when I load Dreamfall Chapters, it switches back to software encoding. Is this normal? I'm not using a beta Steam client, just the regular one.
The latest betas have added a new encoder path for Nvidia that works with more games than the previous ones. It would appear as NVENC in the overlay.