Around 40% of young adults cannot afford to buy one of the cheapest homes in their area even with a 10% deposit, according to the Institute of Fiscal Studies.
House prices in England have risen by 173% over two decades.
But average pay for 25-34 year-olds has grown by just 19% over the same period.
In 1996, 93% of those with a deposit who borrowed four and a half times their salary could purchase a home but that fell to 61% in 2016.
The IFS also said that higher rental costs - up from an average £140 a week to £200 a week in England - have "reduced the purchasing power of young adults' incomes" and made it harder to save for a deposit.
The IFS said that the proportion of 25-34 year olds who own a house has dropped from 55% two decades ago to 35%.
Polly Simpson, a research economist at IFS and a co-author of the study, said: "Many young adults cannot borrow enough to buy a cheap home in their area, let alone an average-priced one."
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