More than 350 councils in England are calling for the freedom to make extra investment in housing to help clear a backlog of almost 400,000 homes given planning permission but yet to be built.

Research commissioned by the Local Government Association (LGA) reveals that across England there is a "bumper backlog" of 381,390 planning-approved housing plots waiting for developers to begin building.

The representative body for local authorities said that the report showed that Westminster should stop "meddling with the planning system" as the rules weren't to blame for a dearth of new homes: nine out of 10 applications were being approved by councils.

Instead the report showed that developers are taking longer to complete work on site and had submitted 5% fewer planning applications than last year.

The report, undertaken by construction industry analysts Glenigan, also found that on average it was taking 27 months for developers to complete building work after receiving planning permission; seven months longer than in 2007-8. Last year the average was 25 months.

The LGA said that government risked starting a new housing bubble if cheap housing finance announced by Osborne in the spring wasn't matched by extra building. It said building work had yet to start on 61% schemes surveyed, and the association called on the government to remove borrowing restrictions placed on local councils. The LGA said that if councils were freed to make their own investment decisions "thousands of shovel-ready sites could be kickstarted into action", adding some 0.6% to GDP.

Councillor Mike Jones, chairman of the LGA's environment and housing board, said: "The bumper backlog of unbuilt homes and the drop in the number of planning applications submitted to councils last year is a worrying sign that the housing market is not yet on the road to long-term recovery.

"While there has been progress made, this risks being undermined if we do not find a way to ensure developers keep up with demand. These figures conclusively show that it is not the planning system holding back the building of much-needed new homes.

"The challenge now lies in actually getting houses built. Government schemes to help buyers access finance risk creating a bubble if there isn't an increase in house building to match it."

Jones added: "Government has an unrivalled opportunity to create jobs, provide tens of thousands of homes and help the economy without having to find a single extra penny.

"New homes are badly needed and councils want to get on with building them. The common sense answer is for the Treasury to remove its house-building block and let us get on with it."

Commenting on the report, the housing minister, Mark Prisk, said that over 330,000 homes had already been delivered in the past three years and that £1bn of central government investment was "helping to unlock many of these stalled sites".

"We've already delivered over 330,000 new homes over the past three years and starts on new homes are up by a third compared to last year, with major developers pledging to use this momentum to increase output and get Britain building again," he said.