The National Housing Federation (NHF) said high property prices, strict lending criteria from mortgage companies and the need for large deposits are big enough obstacles to lock millions of people out of the housing market.
Rents continue to rise, social housing lists are lengthening, and not enough new houses are being built, according to the Telegraph.
David Orr, the chief executive of the NHF, called the UK housing market “totally dysfunctional” and warned construction had to increase to ease the crisis, with many facing “increasingly limited options” in terms of housing.
London will be one of the main areas affected, with the number of people renting their homes overtaking the number of owner-occupiers for the first time in recent history.
In 2010, 51.6% of Londoners owned their homes, with the rest renting. However, by the end of 2012, the proportion of owners is expected to fall to 49.9% as rising house prices put off new buyers. This is expected to fall to 44% by 2021, said the NHF.
Across the UK, home ownership is expected to drop to 63.8% by 2021 from a peak of 72.5% in 2001.
At present, 67% of the UK population are owner-occupiers and the North East is set to be the only English region to see any increase in owner occupier numbers over the next decade, rising marginally from 66.2% to 67.4%.
In the meantime, Oxford Economics which produced the forecasts for NHF, predicts the average house price in England will rise by over a fifth in the next five years from £214,647 in 2011 to £260,304 in 2016.
The NHF said times will get tougher for the thousands locked out of the owner-occupier market.
“We forecast steep rises in the private rental sector, huge social housing waiting lists, and a house price boom – all fuelled by a chronic under-supply of homes,” the group warned.
The economics firm said it expected rents to rise as well in England, from £486 a month in 2011 to £582 by 2016, equating to £1,152 more a year in total.
In 2011 just 105,000 homes were built in England – the lowest level since the 1920s. Plans for more than 220,000 new homes have been abandoned by local authorities since the Government announced the abolition of regional house building targets last year.
Last week Grant Shapps, the housing minister, said that local authorities should encourage residents to live on boats to ease Britain’s lack of affordable housing.
Orr said: “Home ownership is increasingly becoming the preserve of the wealthy and, in parts of the country like London, the very wealthy. And for the millions locked out of the property market the options are becoming increasingly limited as demand sends rents rising sharply and social homes waiting lists remain at record levels.
“At the heart of this crisis is a chronic shortage of new homes. Despite the overwhelming need to increase supply, house building has slumped to a 90-year low, plunging the country even deeper into the mire.”
