A new report from Shelter warns that changes to Housing Benefit could lead to a surge in homelessness which would cost the Government £120 million a year.
The Government plans to cap the Local Housing Allowance (LHA) at 30% of average local rents, with future increases linked to the Consumer Price Index, rather than the Retail Price Index which tends to be higher.
But Shelter warned that an estimated 134,000 households would either be evicted or forced to move home when the cuts come in, because they would be unable to negotiate cheaper rents with their landlord.
Research commissioned by the Group and carried out by the University of Cambridge found around 35,000 households would also be likely to approach their local authority for housing assistance.
It estimates that the annual bill for providing temporary accommodation for these people in hostels or bed and breakfasts would be around £120 million a year.
The Group said councils would also face additional administrative costs from having to process the thousands of homelessness applications they are likely to receive.
Campbell Robb, Chief Executive of Shelter, said:
"Shelter's research clearly shows that not only is the Government's budget regressive, it doesn't even add up.
"The devastating impact of cuts to Local Housing Allowance on some of the poorest families in Britain will mean the Government will not save anywhere near as much as it has claimed.
"Now that the true cost of these proposals has come to light, the Government must urgently re-think these reforms and develop an alternative that protects the most vulnerable and delivers real savings to the Housing Benefit bill."
The Group's warning comes just days after the British Property Federation said changes to the LHA could force some people to leave their jobs to move to cheaper areas because they were no longer able to afford their rent.
Citizens Advice also warned that the proposed cuts to the LHA would lead to increased levels of poverty, debt, rent arrears and homelessness.
It called for the cuts to be delayed until October next year, while it urged the Government to also introduce steps to cushion the impact and smooth the transition for households that were affected, to give them time to find somewhere else to live.
Citizens Advice further warned that when the new caps were imposed, 93% of rents in central London would be unaffordable for private tenants reliant on Housing Benefit, with more than 18,000 households facing average shortfalls of £81 a week.
Housing leaders are gearing up for a double hit from the planned Housing Benefit reform. The proposed changes threaten hardship for individuals and could have a knock-on effect on new housing supply, according to members of the Chartered Institute of Housing (CIH).
Following the proposed reforms to Housing Benefit announced in the Emergency Budget in June, members of the UK Housing Panel have expressed concerns over rising demand for social housing as reduced income threatens to impact new affordable house building.
The proposed reforms are also expected to increase the risk of poverty and rent arrears - unless landlords take action to increase support, welfare and debt advice.
In the third quarterly report from the UK Housing Panel - professionals who record key measures of housing supply and demand, affordability and housing quality - members were asked to assess the possible impact of the proposed cuts to Housing Benefit on their business.
Over three quarters of respondents (78%) said that the cuts could result in increased rent arrears. A further 66% of respondents highlighted the risk of an increase in bad debts as a result of the changes to Housing Benefit. And 54% said they believe that there could be a rise in the number of evictions unless spiralling arrears can be prevented.
Over half of respondents agreed that the proposed cuts in Housing Benefit could lead to increased pressure on housing registers (54%) and a higher demand for services (53%). At the same time, over two thirds of respondents (67%) highlighted the risk of reduced income as a likely impact of the Housing Benefit cuts.
A new tool launched by the Chartered Institute of Housing (CIH) will help landlords calculate how much Housing Benefit their tenants are likely to lose in planned Government reforms and assess the risk of vulnerable tenants falling into rent arrears.
Any tenant who is currently in receipt of Housing Benefit is at risk of having the amount they receive reduced under a range of proposed changes announced in the budget in June.
CIH analysis has revealed that the impact of one change alone, for example reducing Housing Benefit by 10% for those on Job Seekers' Allowance for over 12 months, would see claimants living in social homes lose on average £6.70 per week and those living in private sector housing lose on average £11.20 per week. Many low income households will be hit hard by more than one measure at once.
The new Housing Benefit impact calculator allows landlords to accurately estimate the amount of income which could be at risk on the basis of their rental income, geographical area and type of housing stock.
Additional support from CIH in the form of an organisational impact report and an on-site review will help housing providers prepare for and mitigate the impact of the proposed changes on their tenants and on their business.
CIH is doing extensive work with MPs and officials to ensure that the potential impacts of the reforms are fully understood and to reduce the worst consequences of the proposed changes.
More information on the Housing Benefit impact calculator and related services can be found here.
