Britain needs to build up to 140,000 extra new homes a year if housing supply is to match demand, a Treasury-sponsored report has recommended.

The Treasury's Barker Review of Housing Supply has identified a lack of homes as a major cause of high house prices.

The report said between 70,000 and 120,000 additional private sector homes are required each year.

An annual increase of up to 23,000 social housing units is also needed, at a cost of up to £1.6bn.

But campaign group Shelter said the social housing proposals did not go far enough, and called for around 90,000 affordable homes to be built each year.

Kate Barker, a member of the Bank of England's Monetary Policy Committee, was asked by the chancellor last year to examine problems with Britain's housing supply.

Windfall gain

In her report, Ms Barker said planning bodies needed to take greater account of "market signals" - such as prices, demand and affordability - when setting housing targets and allocating land.

The report also recommends the government "should use tax measures to extract some of the windfall gain that accrues to landowners from the sale of their land for residential purposes".

Ms Barker conceded that her recommendations to boost housing supply would have implications for the environment.