The Housing Industry Association's 2020 report found that Launceston had the second worst housing shortage level in the state last year, with a shortage of 401.

Launceston also ranked in the top three local government areas expected to be high in demand, with 2268 new homes needed by 2020.

The Launceston City Council yesterday said it had addressed the issue in its residential strategy 2009-2029.

"There are several sites which could accommodate more than 900 houses that are approved as residential land and are ready for development," Mayor Albert van Zetten said.

"These include sites in Reservoir Road, Rocherlea, Bertha Street at Prospect and Hillary Street at St Leonards."

The HIA's call for action follows the release of Australian Bureau of Statistics data that predicts Tasmania's population would climb to 571,000 by 2056.

"HIA estimates that over the next 10 years alone, Tasmania will need to build 26,800 dwellings, well ahead of the 21,000 dwellings completed over the previous 10 years," HIA Tasmania executive director Stuart Clues said.

"It is vital to ensure a constant and adequate supply of affordable land is available, while also continually working to reduce planning restrictions and other artificial obstacles that run the risk of constraining our ability to put a roof over Tasmania's growing population."

Sorrell had the worst housing shortage last year, falling 420 houses short, while Hobart was ranked third with a shortfall of 335.

The Northern Midlands Council was ranked 10th with a shortage of 65.

Kingborough has the highest demand, with 2830 new houses needed by 2020, followed by Clarence, with 2304.