A report by the Residential Development Council (RDC) has revealed that there will be a shortfall of 185,076 residential lots within 20 years across the east coast and Perth.
Based on research by Macroplan, the report said state and local governments would need to revise current policies and release additional land or "unprecedented disaster" would occur for housing affordability.
Due to land shortages, the report said the average price of a home had already risen by $28,900, or 9% of the total property price, since 2001.
RDC executive director Ross Elliott said the cost of housing would continue to increase as land shortages got worse over the next two decades.
"Currently the shortage is just under 13,000 lots. In 20 years that will be 185,076, or almost 15 times worse," said Elliott.
He said the lack of available land was a serious problem that called for urgent decision making with consideration for the "big picture".
The report found that Sydney currently has a shortfall of 17,438 lots, south-west Queensland had an excess supply of 24,032 lots but would be replaced by a massive shortage of 62,142 in the next two decades.