The next generation of first-time buyers will face house prices equivalent to ten times their average incomes, putting home ownership out of reach for the majority of young people, a new government agency says today.

The average home in England currently costs seven times annual earnings, but that is set to rise to ten times by 2026 even if the Government succeeds in its aim of sharply increasing the rate of homebuilding, the analysis reveals.

Campaigners said that the developing crisis would “stop social mobility in its tracks”, and force young people to live in overcrowded conditions and take out ever-riskier mortgages.

The stark warning comes from the National Housing and Planning Advice Unit (NHPAU), a government agency that officially comes into being today.

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• Property prices grow at slowest rate in five months

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New planning rules will force all councils to consider affordability and consult the expert panel when making planning decisions. Stephen Nickell, the Warden of Nuffield College, Oxford, who chairs the NHPAU, said he accepted that he might become the focus of anger from “not in my backyard” home-owners if developments were driven through their neighbourhoods.

“There may be some flak,” he said. “But we can’t order planners about. All we can do is say, ‘There are the consequences of your actions’.”

Professor Nickell, a respected economist who until last year sat on the Bank of England’s Monetary Policy Committee, which sets interest rates, said: “Demand for housing is growing and unless action is taken, pressure on the market will only get worse.”