The report, Generation Squalor, found mental health problems were rife among young people in poor housing and they were more likely to truant or suffer from poor physical health.
The charity also found that one in 10 children live in overcrowded accommodation and that the housing divide between the wealthy and the poor has grown wider in the past decade.
Patrick South, deputy director of campaigns at Shelter, said: "Housing departments are not identified in the legislation for children's trusts and the Every Child Matters agenda has not done enough to link the two."
Shelter also warned that the Chancellor's plans to double the stamp duty threshold will lead to greater house price inflation.
www.shelter.org.uk.
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