Dr Kathleen Flanagan, the deputy director of the Institute for the Study of Social Change said research showed Australia needed 727,300 new social housing dwellings.

In Tasmania, 11,100 new dwellings were needed to meet current demand.

She told the housing affordability inquiry that social housing in Australia - including public housing and community housing - had been "under-funded for decades".

"14,200 homes and $3.15 billion is the scale of the problem and we need to confront it," she said.

"We talk about a housing crisis which implies that what we are seeing is something new but market failure in housing is not new," Dr Flanagan said.

"If you are poor or otherwise disadvantaged the housing market has never worked for you.

"The best solution to housing market failure is social housing, that is housing made available on non market terms and allocated on a non-market basis."

Dr Flanagan said the net supply of social housing in Tasmania had bee declining and "will continue to decline"

"Our home building industry needs to change its focus," she said.

"Social housing construction cannot happen off the side of other more lucrative construction.

"It needs to be front and centre in our thinking and our planning."

Dr Flanagan said Tasmania needed "long-term commonwealth funding" to address the social housing shortage.

"We also need tri-partisan commitment to prioritise essential productive social infrastructure that meets the basic needs of citizens over budget surpluses, tax cuts and the avoidance of government debt," she said.

"Difficult political decisions will need to be made."

The Local Government Association of Tasmania told the inquiry ensuring an adequate supply of housing was "not simply a matter of constructing more houses".

In a submission to the inquiry, LGAT chief executive Dr Katrina Stephenson and policy director Dion Lester said housing affordability throughout Tasmania had declined significantly in recent times.

"The shortage of affordable housing has adverse effects across a variety of domains, including the economy and employment, community development, education, transport and health and well-being," they said.

"Building cheap houses on the urban fringe away from employment and services will not improve housing affordability - it will just shift the costs (in dollars and time) from housing to transport and social isolation.

"Housing supply must be well located and well serviced in areas where infrastructure can provide for and attract new residents, with supporting jobs, social and community infrastructure and public transport."