Housebuilders and employers in the South West have asked the government for a "crisis" meeting on housing.
The South West Housing Initiative (SWHI) said that without more affordable housing, young people will leave the region.
The result would be a "dire threat to the region's economy", it said.
The call followed an increase in housing waiting lists of 64% in Devon and 88% in Cornwall over the five years from 2002 to 2007.
The government's Regional Spatial Strategy 2006-2026 said 29,623 new homes a year were needed in the South West.
"There is a shortage of housing in the area, but any development needs to support our towns and villages, not destroy them"But Martin Willey of the SWHI said only 10,000 new homes were being built and the situation was being made worse by the economic downturn.
He said: "This represents a dire threat to the region's economy, making it increasingly impossible for the South West's young people and key workers to find a home.
"That will force those people to seek homes and jobs elsewhere, and leave this region bereft of its young people and key workers, like teachers, nurses, policemen, firefighters, and skilled employees of private companies."
He said the issue was threatening to "cripple" the region.
"The South West is a beautiful place, but there are lots of examples where housing has fitted in well.
"The main problem is prejudice or lack of information, so we feel that there is a proper conversation to be had."
Falmouth and Camborne MP Julia Goldsworthy warned that more than 10,000 houses proposed in the Spatial Strategy for the Camborne and Redruth area would lead to "urban sprawl" that would "destroy the distinct identity of the separate towns and villages".
She said: "There is a shortage of housing in the area, but any development needs to support our towns and villages, not destroy them."
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