If the government is to meet its target of building three million homes by 2020 it needs a better understanding of the demand from local people, a study has found.

A new report from the Centre for Cities claims simply increasing the overall supply of housing will not fix the wide range of economic challenges faced by Britain’s towns and cities.

Dermot Finch, director of the Centre for Cities, said: “If we want to see the right houses in the right places, ‘build, build, build’ isn’t always the answer.

“It’s not enough to talk about the big three million target – politicians from both central and local government need to understand where in Britain’s jigsaw of local economies new houses should be built.”

Houses need to be built in response to the economic needs of individual cities, the report said.

In cities with thriving economies, such as Cambridge or Bristol, many people cannot afford to get onto the housing ladder. A nurse living in Cambridge earning £18,500 would need to invest eleven times their salary to afford even an “affordable” house in the area (compared to a national average of 7.25 times).

But cities with smaller economies, such as Sunderland or Bradford, have an opposite problem, with too few homes of the size and type to tempt high-skilled workers into the area.

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors (RICS), said: “Rather than simply looking at delivering a number of units, housebuilding needs to be tailored to respond to local demand and housing need.

“Innovative solutions are needed to give people the homes they want, including greater use of the private rented sector and a wider role for schemes such as rent to buy.”

The report urges cities to plan new house-building based on a better understanding of local demand and suggests local authorities should collaborate across real housing markets, and not work in isolation, in order to find a solution.