The number of homeless families put up in temporary bed and breakfast (B&B) accommodation has increased by almost half in the first three months of 2012.
The National Housing Federation said in a release that 3,960 families were living in B&Bs during this period, an increase of 44 percent from the same period in the previous year.
The years 2011 and 2012 had seen the total number of homeless people rise for the first time in seven years, up by 26 percent.
The Guardian reported that the issue is more serious in inner London where the government's housing cap has prompted many families to approach the councils for help.
Westminster council told the Guardian that more than "1,150 households approach for advice and assistance due to the local housing allowance (LHA) cap. In July, 141 households approached for advice, an increase of 27 on the previous month."
"We believe the rise in acceptances is the result of the LHA caps and a high proportion of applications coming from families who are unable to find alternative accommodation, who we are required to accept through homeless legislation," the council added.
Due to limited affordable homes, low income people are often sent out of the capital city. Westminster said that in the previous month it had secured property in Hemel Hempstead, Bletchley, Maidstone and Grays for the homeless.
The National Housing Federation said that such houses leased out by the authorities and housing associations are preferable to the temporary B&Bs as they are more stable and secure.
"In a B&B whole families can find themselves sharing one room and they are often shut out of their accommodation during the day, causing huge disruption to daily routines of school and work," said David Orr, chief executive of the National Housing Federation.
"Every child deserves a decent home to come back to after school, where they feel secure, and where they can sit down to do their homework. That is what temporary accommodation provides," he added, suggesting that without the safety net of temporary housing, homelessness could be a vicious cycle.
But from 2013 more people could be pushed to the B&Bs or to the streets as the new universal benefit cap limiting the benefits to £500 a week comes into effect, said the federation.
"It is essential that the government puts in place measures to protect this crucial service and the vulnerable families who depend on it," Orr said.