By Laila Kearney

NEW YORK (Reuters) - More than 25,000 children stayed at New York City homeless shelters on an average night in 2014, setting a new record, according to an advocacy group report released on Thursday.

The city on average has more than 60,000 homeless people each night staying at shelters, most of which comprise families with children under 18, the Coalition for the Homeless said in an annual report.

"Homelessness has a devastating impact on children," said Coalition spokesman Patrick Markee, who wrote the report. "It takes a real toll on parents as well."

Homeless children have difficulty in school, and many of them are being raised by single mothers who were victims of domestic violence and also have trouble holding down jobs, Markee said.

Over the year 2014, the number of families staying in New York City shelters rose by 14 percent, and they are the fastest-growing demographic of the city's homeless population, the report said.

The uptick, about five times greater than recent overall population growth in New York, is largely due to soaring rents and reduced housing assistance, the report said.

The report said the average stay in a homeless shelter for a family with children is more than 14 months.

About a third of the adults with families in the shelter system are working but do not earn enough to afford market-rate rents, it said.

There also has been a spike in families entering shelters after being evicted in neighborhoods being gentrified, it said.

Among those hardest hit by surging costs and less housing assistance have been African-American and Latino households, it said.

About one in 31 black New York families and one in 57 Latino families recently stayed in homeless shelters, while only one in 615 white families did so, the report said.

A slightly improved picture is expected this year as the administration of Mayor Bill de Blasio phases in a plan to move more than 5,000 homeless families out of shelters into permanent housing, the report said.

The coalition urged an increase in state-funded rental assistance programs, construction of more public housing apartments and additional assistance to New Yorkers with disabilities to combat homelessness.

(Editing by Ellen Wulfhorst and Eric Walsh)