Nearly half of all homeless hostel beds are blocked by people who want to move on but cannot find permanent accommodation, according to Homeless Link.
The umbrella body says that hostel "bed blocking" is so serious it could lead to the numbers of rough sleepers rising again.
A survey found that the average length of stay in a hostel is now between six months and a year. In the worst 10 per cent of cases, that figure rises to more than two years.
The charity blames a shortfall in new supported housing, caused by social landlords' fears that the Government will not pay for their running costs.
Homeless people are also frequently unable to afford the deposits required by private landlords, it claims.
"There are thousands of people stuck in hostels across the country who are ready to move on," said Homeless Link director of campaigns Dominic Williamson. "This problem is wasting lives and money. Action needs to be taken now to increase the numbers of people moving on from hostels into permanent homes."
But Homeless Link says regional housing boards are ignoring the problem.
London has the only board to have set a target for increasing the supply of accommodation for homeless people to move to.
The charity wants local authorities and social landlords to donate 10 housing units each for hostel residents. And it is calling for a rent-deposit scheme to be set up so homeless people are able to move into private rented accommodation.