House builders must explore new innovations in building if they are to meet demand for new housing, says a homes guarantee provider.

The report comes in response to government figures released this week showing the number of households in England is projected to increase by 209,000 every year until 2026.

House builders are only constructing some 150,000 new homes a year so there is a big gap. Some builders are ready to build more but say they are held back by an antiquated planning system which is seriously restricting the output of new homes.

Philip Davies, chief executive of Linden Homes argues that as well as planning restrictions, new taxes will further hold back builders. "We face government proposals for a new planning gain supplement, a land tax that would tie house builders’ hands even further by impeding the release of land for development," he said yesterday.

But Robin Plaster, managing director of new homes warranty provider Premier Guarantee thinks house builders should explore more radical methods of producing homes.

"It is essential for them [house builders] to embrace new innovations in building if they are to meet the soaring demand for new homes over the next twenty years and avert a potentially catastrophic housing shortage," Mr Plaster said.

"Our statistics show that cumulatively there has been a two per cent increase in applications to build new homes in the last year, but this is not anything like enough," he pointed out.

Mr Plaster says modern methods of construction (MMC), where all or part of the construction takes place in a factory, could offer a solution to the shortage, allowing homes to be built at a much faster rate as well as achieving greater quality due to highly automated factory conditions.

"Only by embracing such innovations and changing the way we build, do we have a hope of meeting this demand within the constraints of the current planning system," said Mr Plaster.