Its report says average rents are now unaffordable for ordinary working families in 55% of local authority areas. It is the clearest sign yet of a private rental sector that is out of control.
Over the last five years there has been a rapid growth of private renting due to a number of social and economic reasons.
More private properties are being used by councils to house people and this has only exacerbated a shortage in properties.
Disused buildings have potential for increasing rental properties
The recession and banking crisis have led to a restriction in mortgage credit, denying millions of people access to the housing ladder. In the last five years, there has been a 40% increase in the number of private rental properties. The sector now accounts for 15.6% of properties, around 3.4m in total.
Above all, it is the shortage of decent affordable homes that has led to the crisis. Jackie Sadek, chief executive of UK Regeneration, hopes to kick start a programme of build-to-let projects on brown field sites across the country.
The huge and empty Heygate Estate in Elephant and Castle, South London, is one such potential opportunity.
"The answer is the private rented sector and building out homes for rental in the same way as the old council housing and housing association model worked in previous decades," she said. "We now need a private sector response to the fact that people need to rent their homes."
But according to Mira Bar Hillel, property correspondent at the London Evening Standard, private developers have often been reluctant to become involved in build-to-let developments because of the poor image of the private landlord in the UK.
"The mood is very anti-landlords. Thanks mainly to scandals associated with landlords like Peter Rachman, landlords are seen as villains and tenants are seen as somehow saintly people," she said.
Hannah Smith was forcibly evicted from her private rental flat
"Furthermore there is no political will whatsoever to encourage a large, professional private rental sector as is the norm in our competitor countries such as German, France and the US."
In the past two years, there has been a 25% increase in the number of complaints received by councils about private landlords. Currently, 1,477 landlords are causing local authorities concern, subject to total of 86,000 complaints, an average of 58 complaints each.
They range from illegal evictions and harassment, to disrepair and dangerous gas and electrics.
Hannah Smith, who is 20, now has a one bedroom council flat in Maidstone, Kent. But back in May, she and her partner were made homeless after their landlady forced their eviction from a private rental by changing the locks. She is taking legal action for compensation.
Hannah was five months pregnant at the time of the eviction, but lost the baby four days later.
"There was no medical reason for it and it's unknown as to whether it happened because of stress. It could have been but it might not have been, and to this day we don't know," she said.
"All I know was that I was under a lot of pressure so it's quite likely it could have been. It was awful so it's quite likely that could have been the cause that lost me my baby."
Campbell Robb, Chief Executive of Shelter, is calling for government action to control the private rented sector.
"With huge differences in affordability across the country, there are now worrying signs that families are likely to be displaced by our out-of-control rental market.
"Over recent years we have seen more and more people forced into renting, as high house prices and a lack of social housing have made it the only option for thousands of ordinary families. What we're seeing now is that renting is no longer the easy, cheap alternative to home ownership."
The government hopes to get developers to build 100,000 new homes by 2015 on government-owned land by offering them a "build now-pay later" deal.
"We think there has to be a couple of hundred thousand new homes created each year. Something in that kind of order," says housing minister Grant Shapps.
"On this private rented sector issue, a lot of people say to me why don't you cap rents that would force it down? I'm convinced that would be a bad thing to do. When rents were capped, the private rented sector shrunk from half over half of all houses to just 8% by the time the rent caps were released. Building more homes is."
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