Growing numbers of people are being squeezed out of the housing market while first-time buyers find themselves very stretched, research has concluded.
Most first-time buyers find life tough
Inadequate affordable housing, rising repossessions and failure to apply for housing benefit were serious concerns, the Joseph Rowntree Foundation said.
Its research found that a third of all working households with occupants under 40 could not afford to buy property.
On the positive side, it said housing quality had improved in certain areas.
But the prospects for people on middle and low incomes to get onto the property ladder are worrying, the foundation said.
Research for the foundation carried out by the New Policy Institute found that "adverse shifts" in housing supply, buyer affordability and security of tenure had occurred in recent years.
The report found that half of all working households in the south of England - which has the highest house prices in the UK - cannot afford to buy property even at the cheapest end of the market.
At the same time, the amount of money that first-time buyers are having to set aside for mortgage repayments as a percentage of their monthly salary has risen to its highest level since 1990.
"Our analysis points to worrying prospects for those on middle incomes and below," said Guy Palmer, co-author of the foundation's Housing and Neighbourhoods Monitor report.
"The most pressing policy challenges concern increasing affordability for first-time buyers and ensuring housing is available for those on low incomes."
Housing Minister Yvette Cooper told the BBC's Today programme that the government was working hard to try and alleviate the shortage of affordable housing.
"We are going to be launching, in about two weeks time, a new partnership with some of the mortgage lenders to offer new shared ownership loans for people who want to be able to get into home ownership but cannot afford the whole house price," said.
She also said the government was looking at reforms to the planning system to make it easier for new homes to be built, but said this had to be part of wider infrastructure improvements.
The number of affordable houses being built for those requiring subsidised housing has failed to keep pace with demand and is currently lower than it was a decade ago.
Court orders for repossessions have doubled since 2003 while the number of homeless people being placed in temporary rather than permanent accommodation has more than doubled since 1997.
"The government needs to refine the methods for judging regional and local imbalances between household growth and housing stock," Mr Palmer added.
On the plus side, the foundation acknowledged that substantial progress had been made in improving energy efficiency in both new and existing homes and reducing fuel poverty among vulnerable groups.