Binyamin Netanyahu, Israel’s prime minister, is confronting a second highly critical report from the state’s official watchdog in barely a week, this time concerning his government’s inaction over Israel’s overheated and dysfunctional housing market.

The publication of the report – which his Likud party had sought to delay – comes only three weeks before Israel goes to the polls in a closely-fought election in which Netanyahu appears increasingly vulnerable.

It is potentially damaging for Netanyahu because it addresses the key concern of Israel’s electorate – the soaring cost of living and growing social equality.

Those issues, which triggered widespread social protests in Israel in 2011, have remained a source of discontent in a country where buying an apartment is out of reach for most young Ipeople and where rents also have risen significantly in major cities.

The publication follows a report from the same body over excessive expenditure in Netanyahu’s own official residence which attracted wide comment, not least for the disparity between the lifestyle of the prime minister’s household and ordinary Israelis.

The report is likely to supply ammunition to Netanyahu’s opponents and comes amid the continuing and bitter controversy over his plans to address the US Congress next week on the issue of Iran’s nuclear programme – which he is pushing as his key election issue.

In the latest and perhaps most damaging intervention so far, Susan Rice, Obama’s national security adviser, warned the planned speech was “destructive” to Israel’s relationship with the US.

“What has happened over the last several weeks by virtue of the invitation that was issued by the speaker and the acceptance of it by prime minister Netanyahu two weeks in advance of his election is that on both sides there has now been injected a degree of partisanship, which is not only unfortunate, I think … it’s destructive of the fabric of the relationship,” she said.

Rice’s comments came as it emerged that Netanyahu had rejected a proposed meeting with US Senate Democrats during his visit, saying it would fuel “misperception of partisanship” over his planned address to Congress.

Netanyahu’s party is running neck and neck with his main rival – the Zionist Union led by Yitzhak Herzog and Tzipi Livni.

Israel has seen housing prices soar in the past five years by a staggering 55% as wages lag seriously behind.

Blaming red tape and political gridlock over a failure to deliver sufficient new suitable housing – not least for the lowest income sector – Wednesday’s report cites delays in some new developments of up to 12 years.

It describes a situation little better for those renting, who saw rental costs increase by 30%.

Although the period covered by the report takes in the last months of the premiership of his predecessor, Ehud Olmert, its main focus is on the stewardship of Israeli housing since Netanyahu has been prime minister, criticising a number of ministers and state institutions.

The report suggests the crisis threatens not only individuals but the entire wellbeing of Israel’s economy if not solved quickly.

According to statistics compiled by the report, between 2008 and 2013 the percentage of a person’s monthly salary required to rent has increased from around 29% to around 38% – a hike so severe that it has seen many having to cut in other areas to avoid losing their homes.

Israel’s state comptroller, Joseph Shapira, said the housing crisis “most significantly impacts society’s weaker sectors and the middle class”. He claimed the government has been aware of the situation for years without taking remedial action.

Shapira accused Netanyahu’s government of being slow to respond. “Only in July 2013 did the cabinet decide to appoint the housing minister ‘to lead the formulation of a long term housing policy’ — a task which was not yet implemented by the time the [State Comptroller’s] report was completed.”

The former finance minister Yair Lapid, whom Netanyahu fired in December, said in a statement: “The housing crisis in Israel is a direct result of Netanyahu and the Likud ignoring the issue. Years of procrastination, inaction and corruption caused house prices to increase outrageously.”