Around 100,000 households per year are being priced out of the housing market, according to a Treasury-backed report.

Coinciding with the chancellor's pre-Budget report, Kate Barker's study of future housing needs concluded that 39,000 additional houses a year are required in England to accommodate population growth and changing living patterns.

And it warned that in recent years between 93,000 and 146,000 households per year have been priced out of the housing market in England compared to affordability levels in the late 1980s.

Highlighting a long term shortage of housing caused by declining supply, the report said that over the past ten years the number of new dwellings built has been 12.5 per cent lower than in the previous decade.

"Housing has a huge impact on people's quality of life. The government is already doing a great deal to tackle housing supply problems," said Barker.

"However, it is clear that the UK housing market is not working as well as it should.

"In particular there is a problem of weak supply, with major implications for the UK's economic well-being and house price volatility."

The report concluded that if UK house prices had risen in line with the European average since 1975, the UK economy would have been £8 billion better off.

The key factor causing the housing shortage is the supply of land, said the report.

It found there was a "reluctance to build out large sites quickly" in the housebuilding industry, while regulatory requirements also had an impact.

Highlighting remedial action that the government could take, the report also said that infrastructure barriers hold up construction of over 40,000 dwellings in the South East alone.

"Local authorities have few positive incentives to build and few sanctions if they fail to meet targets, while the planning framework could respond better to market signals and take better account of costs and benefits of development," added the report.