DEMAND for homes is outstripping supply in the UK according to a new report, which calls on the government to increase housebuilding.

The National Audit Office (NAO) has carried out an overview of the housing market in which is highlights the need for more properties, particularly affordable homes.

According to the NAO’s report housebuilding in the country has not kept pace with demand, especially in London. Its projections show that there will be at least 227,000 new households formed each year between 2011 and 2021. This is “substantially higher” than the annual average of 166,000 extra homes built in England over the past 10 years.

Housing has become more affordable for existing homeowners in the past decade, according to the report, with the proportion of owner-occupiers who spend at least a quarter of their disposable income on housing falling from 40 per cent to 19 per cent of those with a mortgage. In contrast however housing is far less affordable for first time buyers and social housing rents have increased faster than earnings since 2001-2.

As a result homelessness has been on the rise in the past five years. At the end of March 2016 there were 71,500 households in England in temporary accommodation – an increase of 48,000 compared to 2010-11.

Amyas Morse, head of the NAO, said: “The need for housing in England has in recent years grown faster than its supply, and housebuilding needs to increase across the country. The government has responded to this by putting in place a range of policies to increase housing supply and home ownership. Central to this is an ambition to increase the supply of housing by one million homes by 2020, largely through support to private housebuilders. Delivery of this target will not require a substantial increase in current levels of housebuilding.”

Total estimated government spending on housing in England was £28 billion in 2015-16. This biggest element of this was housing benefit. In 2015-16 there were 4.1 million claimants in England costing around £20.9 billion. The government is aiming to deliver a million new homes in England by 2020. This will require it to build 174,000 new homes each year, which includes both newly built homes and converted properties.

The NAO’s report highlights the uncertainty over what impact Britain’s decision to leave the EU will have on the housing market. There were early indications of a slowdown immediately after the referendum result, but recently there have been modest increases in the number of property sales being agreed in England.