The Local Government Association (LGA) study shows nationally-set planning fees prevent councils from being able to recover the full cost of processing 467,000 yearly planning applications.
As a result, the LGA estimates this has left local taxpayers covering a third of the cost of all planning applications since 2012, due to new legislation covering fees.
The government is now being urged to free councils from having to divert resources away from local services by allowing them to set their own planning fees as part of the spending review.
Cllr Peter Box, LGA Housing Spokesman, said: "It is unacceptable for communities to keep being forced to spend hundreds of millions each year to cover a third of the cost of all planning applications.
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"The Spending Review should allow local authorities to recover the actual cost of applications and end such a needless waste of taxpayers' money when developers are willing to pay more.
"The number of planning applications being submitted is on the rise but councils are working flat-out to approve almost nine in every 10 planning applications ."
A recent British Property Foundation (BPF) survey has found two thirds of its private sector respondents would be willing to pay increased fees to help under-resourced planning departments.
Further analysis by the LGA reveals covering the cost of planning applications is growing at a rate of around £150m a year, and will pass £1bn by 2020.
This would have covered training up to 115,000 young people with construction skills, or filling almost 8.5 million potholes.
Melanie Leech, Chief Executive of the BPF, said: "Both the public and private sectors are very clear that the current lack of resources for local authority planning departments is a problem, and that it is hindering development that can bring about much needed regeneration across the UK.
"The Government has talked a lot about how much it wants to get Britain building again, and ahead of the Spending Review we would strongly advise against further national cuts to planning departments if it wants to make this a reality."
(LM/CD)
