Speaking ahead of a visit to a housing development in Barnet, in North London, Theresa May said more work was needed to address the problem.
She said: “For decades we simply have not been building enough homes, nor have we been building them quickly enough, and we have seen prices rise.
“The number of new homes being delivered each year has been increasing since 2010, but there is more we can do. We must get back into the business of building the good quality new homes for people who need them most.”
The prime minister said she was taking personal charge of the government’s response to housing needs, adding that the government will be going further to ensure more homes are built more quickly.
Today (16 November) the Department for Communities and Local Government released statistics which showed there were 217,350 new homes built in England in 2016-17, up 15 per cent on the previous year.
This is the first time in almost a decade that the milestone of 200,000 homes a year has been reached.
Before last year the most recent peak was 2007-08 when 223,530 homes were built but supply of new homes fell to 124,720 in 2012-13 after the economic crash.
Speaking at the Temple Meads Quarter in Bristol, Sajid Javid, the Communities Secretary, said it was good news that this milestone had been reached by said a "much larger effort" was needed.
He pointed out that the average house price is now eight times the average income and the average age of a first-time buyer is now 32.
The average first-time buyer in London needed a deposit of more than £90,000 and Mr Javid said it would take an average couple a quarter of a century to save for this.
He said: "That affordability is only a problem for millennials that spend too much on nights out and smashed avocados. It’s nonsense.
"The people who tell me this – usually baby boomers who have long-since paid off their own mortgage – they are living in a different world.
"They’re not facing up to the reality of modern daily life and have no understanding of the modern market.
“The generation crying out for help with housing is not over-entitled. They don’t want the world handed to them on a plate. They want simple fairness, moral justice, the opportunity to play by the same rules enjoyed by those who came before them.
“Without affordable, secure, safe housing we risk creating a rootless generation, drifting from one short-term tenancy to the next, never staying long enough to play a role in their community."
Mr Javid said the Housing White Paper set out the government’s broad vision, describing the scale of the challenge and the need for action on many fronts.
Published in February, the white paper offered higher fees and new capacity funding to develop planning departments, encouraged greater diversity of homebuilders and offered a “clear and stable long-term framework for investment,” including products for rent.
Mr Javid said: “There are many, many faults in our housing market, dating back many, many years. If you only fix one you’ll make some progress, but not enough. This is a big problem and we have to think big.”
Mrs May said the government is already increasing the affordable housing budget by an additional £2bn to more than £9bn, setting a long term rent deal for councils and housing associations in England from 2020 and keeping the Help to Buy scheme.
This scheme has helped more than 130,000 more families get a deposit to buy their own home and Mr Javid said the Government has invested a further £10bn in Help to Buy to help a further 135,000 households by 2021.
The recently set up House of Lords Economic Affairs committee inquiry into the UK housing market will look at whether the supply of reasonably priced private housing can be increased, whether the current trend away from homeownership is what is wanted, whether Help to Buy has been effective at improving the affordability of housing and whether there are tax measures which can improve housing supply.
