Nearly a million more young adults are living with their parents than was the case two decades ago, a study has found.

The figures, in a report by the right-leaning thinktank Civitas, will fuel concerns that too little is being done to protect young people from Britain’s housing crisis.

The proportion of people aged 20 to 34 who live with their parents has risen from 19.48% in 1997, equating to 2.4 million people, to 25.91% in 2017, equating to 3.4 million.

The report says the findings have profound implications for the government’s housebuilding targets. It also notes a “collapse in single living” among those who do move out of their parental home, as young people are now far more likely to be living with partners or friends.

“The data is bearing out what we feel anecdotally to be the case,” said Daniel Bentley, the editorial director of Civitas. “Younger people are beginning to live with their parents for longer and are finding it more difficult to move out. If they do move out, they’re often living with larger groups of people.”

The study used data from the Office for National Statistics to look at average household sizes over long periods. The average size fell from 3.3 people per household in 1951 to 2.36 in 2001. However, it flatlined at 2.36 in the early 2000s and had risen to 2.39 people per household by 2017, the highest level since 1999.

This has implications for how many homes will need to be built in the future. The government develops its housebuilding targets using household projections, calculating how many households are likely to be formed in the future by looking at patterns over recent decades. Bentley said if the government failed to acknowledge the drop in the number of young people moving out or living alone, “it will reinforce an undersupply for housing for decades”.

The growth in young people living with their parents has been strongest in London, which saw a 41% increase between 1996-98 and 2014-15.

“Jeffrey Patrick”, 26, who asked for his real name not to be published, moved back in with his parents in north London six months ago after struggling to find a stable job. After six months of being on employment support allowance, he was told he no longer qualified for the benefit.

“The most frustrating things about it is, one, you’re 26, you’re meant to have achieved so much at life, but you’re back at home living with your parents. It’s also unfair on my parents – they have to have a 26-year-old move back into the house, which creates all sorts of pressures on them,” he said.

“It has a massive effect on your social life. It’s difficult to sustain a relationship when you’re next door to your parents, you’re geographically distant from your friends and you’re in an area that’s really grim.”

Umar Parkes, 22, an estate agent who lives with his mother in London, said: “The figures don’t surprise me. I almost feel like I’m born a generation too late … I don’t know anyone, from the top of my head, younger than 30 who has purchased a property.”

Parkes said he was keen to move out but could not afford to do so. “It’s going to take a long time to save up,” he said.

The shadow housing secretary, John Healey, said: “These figures should shake the government out of their complacency. Home ownership has been in freefall for younger people and the number of new genuinely low-cost homes being built has fallen to near-record lows.”

Nick Ballard, a national organiser for Acorn, a renters’ union, said: “Uncapped rents and house prices force young people into a kind of ‘suspended animation’ where they are unable to take many of the steps associated with adulthood.

“The independence and confidence that comes with making your own home are denied them, often accompanied with increased dependence on parents, leading to increased stress and mental health issues for all concerned.”

Liz Emerson, co-founder of the Intergenerational Foundation, said the report’s findings were a symptom of a housing crisis that prevented young people from striking out on their own. “For young people this means a loss of independence and shattered dreams and reflects that the older generation own more than their fair share of housing wealth,” she said.

Polly Neate, the chief executive of Shelter, said: “Decades of failed housing policy have meant that young families and people on lower incomes now struggle to find somewhere to live. This is yet another example of how the housing emergency is being felt across society.

“Shelter has found that we need 3m new social homes in the next 20 years, including for young families unable to get on the housing ladder. This requires bold action. The cost of not acting is far greater.”

• This article was amended on 9 February 2019 to change a description of Civitas.