The Chartered Institute of Housing is calling for urgent attention to the needs of 3m households in the private rental sector

Britain's "golden age of home ownership" is coming to an end, and millions of young people face a lifetime of renting instead, a major housing organisation warns today.

The Chartered Institute of Housing is calling on the government to turn its attention urgently to the needs of more than three million households in the private rental sector.

Its wake-up call comes as figures reveal that in the most expensive parts of the country first-time buyers need to amass deposits of more than £40,000, almost double the average income, to have any chance of buying a home. Research released today by Hometrack, the property analyst, shows that in London a single person would need to earn more than £50,000 a year to obtain a mortgage for a two-bedroom flat at the bottom end of the market.

The CIH says home ownership is becoming an increasingly untenable aspiration for millions of Britons – marking the start of an immense cultural shift. Families who cannot save deposits or access mortgages are falling into a black hole in the market.

In a study released today, the CIH also calls for action to help the "in-betweens", who tend to earn more than £12,000 but less than £25,000. They are too well-off to stand a chance of obtaining social housing – which has a waiting list of 1.8 million – but too poor to make it on to the housing ladder. It claims shared ownership schemes, where people buy 50% to 75% of a property while a housing association buys the rest, are also out of reach.

Sarah Webb, CIH chief executive, says the "in-betweens" do everything the government asks - working and generally not claiming benefits - but not getting anything in return. "This idea that an Englishman's home is his castle gained momentum in the 1980s with right-to-buy, and then post the 1990s downturn when people saw owning a home as not just accumulating somewhere to live but also an investment," she said. "That home ownership is out of reach for a lot of people and we need to move to a situation where renting is a positive choice. A golden age of home ownership is coming to an end. The time has come to move away from the notion of 'right-to-buy' and 'wrong-to-rent'."

Webb said she was concerned by the lack of "policy focus" on this group. Government figures show four out of 10 homes in the sector are "non-decent", with problems such as damp, inadequate bathrooms and kitchens and broken windows. The CIH is calling for councils and housing associations to refocus their attention and consider "intermediate renting" schemes, which offer homes at below the market rate.

Richard Donnell, a director at Hometrack, said that, while the "long-term" aspiration for people around 30 was to own a home, increasing numbers believed it would not happen in the next three to five years. "The argument is that we are moving towards a more European model, where first-time buyers are in their late 40s and come in with 50% deposits."

According to David Orr, chief executive of the National Housing Federation, we are "in the midst of an unprecedented housing crisis" unparalleled in its breadth and depth.

A government spokesman said it had taken action to support the private rental sector but still wanted to support those who aspired to buy.