Experts say that around 50,000 people with dementia will have to go into care homes prematurely due to not having enough support in their own homes.
The Alzheimer's Society report says that the majority of people with dementia would choose to live in the community.
However, they are offered insufficient assistance with everyday tasks such as washing, shopping and dressing, it adds.
The study claims that thousands of people with dementia are admitted to care homes or hospitals when they could be supported at home.
The state faces a bill of up to £70m for each "avoidable" month these people spend in care homes, according to the study.
Care homes cost an average of £559 every week.
There are 750,000 people living with dementia in the UK, two thirds of whom live in their own homes, with the remainder living in care homes.
For the study, the charity received responses from almost 1,400 carers of people with dementia and 48 people living with the condition, as well as 989 care home workers.
The results showed that 83% of carers thought being able to live in their own home was very important to the person with dementia.
However, 50% reported that the dementia patient was not receiving sufficient support and care to meet their needs.
The report said: "Current hospital and long-term care costs resulting from dementia are unsustainable and represent a significant opportunity for resources to be used more effectively while achieving better outcomes."
"The government need to make it law so Alzheimer’s patients and their families receive the assistance they want and need, that is best for themselves and their families, and have the choice to continue living at home, receiving support and having the option wherever possible to participate in society. By making it law it would gain media attention, and also raise public awareness at the same time" - Elizabeth Price, Shrewsbury
"More personalised care and the ability to stay in their own home along with a good support system" - Sheila Watkinson, Lincolnshire