Demand by "key workers" for low-cost housing is far outstripping supply, according to a report out on Thursday.

The Joseph Rowntree Foundation found provision for essential service workers is poor in areas where market prices are high. It voiced concern that local authorities often fail to recognise the benefits of schemes such as shared ownership, "Homebuy" and other low-cost schemes when considering new housing developments in their area.

"Swamps and alligators: The future for low-cost home-ownership" examined the future for publicly subsidised, low-cost home-ownership projects and drew on submissions to the government's housing green paper unveiled this week.

The report concluded that the strategic use of low-cost home-ownership initiatives can achieve wider benefits, in addition to increasing housing supply. These include helping achieve more inclusive, mixed-income communities as well as contributing to economic and social stability in both high and low value areas.

It also found that local authority decision-makers often fail to take a strategic view when allocating capital resources for new housing provision, focusing narrowly on meeting urgent needs on a short-term basis that excludes a low-cost home-ownership dimension.

There is some evidence of poor performance by some providers of low-cost home-ownership and an inequitable range in the rents charged to shared owners (with some purchasers paying less than half the rent of others).

The foundation called on the DTLR to send a clear message to local authorities stressing their responsibilities for meeting the housing aspirations and needs of the wider community.

It also recommended that all registered social landlords providing social housing should include some low-cost home-ownership and that they meet clear and defined standards of management and competence for such schemes.

Lord Best, director of the Joseph Rowntree Foundation, said it was time for housing organisations and the government to think radically.

"Significant evidence now exists that housing large numbers of vulnerable or low-income households in the same estate only serves to concentrate the problems of social deprivation and lack of cohesion. Including low-cost home ownership properties as an integral part of social housing can help achieve stable communities rather than 'welfare ghettos' which stigmatise their occupiers. The time has come for single, 'mono-tenure' developments of social housing to be outlawed: mixing low-cost home ownership in the same development protects against loss of status for residents and loss of value for the housing association," he said.