Asylum seekers are suffering "unacceptable" destitution because of government policies, a report published by the Church of England has said.
Dr Sentamu and Dr Williams visited a street market to mark the launch
Archbishop of Canterbury Dr Rowan Williams and Archbishop of York Dr John Sentamu unveiled the Faithful Cities report in London.
The report also called for a narrowing of the gap between rich and poor.
The report comes 20 years after the Faith in the City paper which attacked some of Margaret Thatcher's policies.
The report said asylum seekers should be allowed to take paid work to sustain themselves and contribute to society.
It said it was "unacceptable" to use destitution as a "tool of coercion" in the treatment of asylum seekers.
It said the gap between rich and poor had widened despite multi-million pound regeneration projects in many urban areas.
"The experience of the faithful on the ground is that the poor are the losers in a widening prosperity gulf.
"We live in one of the most economically unequal countries in Europe and not only has the 'trickle down' promise of market forces failed to deliver but a draconian asylum system consigns a small section of the population to unacceptable destitution."
The report also called on the government to look at the implementation of a higher "living wage" than the minimum wage, which is currently £5.05 an hour.
Dr Rowan Williams said the document was 'challenging'
The gap between rich and poor and the multicultural nature of many inner-city areas had given rise to racial intolerance and "fear of the stranger", the report said.
The report also warned that racism and intolerance within communities was growing.
The Faithful Cities report was produced by church leaders, clergy, academics, activists and other figures from Christian churches and other religions.
Its release came as Dr Williams and Dr Sentamu visited a street market and community project in Camden in north London.
'Challenges us all'
Dr Williams described the report as "challenging".
He said: "It is the result of a great deal of consultation with the people at the sharp end in our inner cities, notably the people who live there. It does not point the finger at any one agency alone.
"It challenges us all - churches, faith communities, development agencies and government, local and national."
Dr Sentamu said: "This report asks 'Why is it that young people in Britain, the fourth largest economy in the world, are the most depressed in Europe?' That question demands an answer.
"Local communities, authorities and central government have a crucial role in making faithful cities flourish."
The Faith in the City document marked a low point in relations between Mrs Thatcher's Conservative government and the Church of England, with some Tory MPs criticising it as a "Marxist" document.