The coalition's benefit cap is pushing families in the capital into poverty, a London borough may has warned.
Sir Steve Bullock, the Labour mayor of Lewisham and housing spokesperson for London Councils, told politics.co.uk that more and more families were being forced into bed and breakfast accommodation, paid for by the taxpayer, as a result of the changes.
He said in Lewisham 825 households would be affected by the benefit cap of £26,000 when it is introduced in full in April 2013.
Of those, 200 families will suffer a loss in income of over £150, forcing them out of the properties they are living in at the moment.
"That's potentially 200 families who will be turning up at Lewisham council's housing office, saying we can't afford to pay the rent where we are at the moment," Bullock warned.
"To have a welfare system which discourages people working is something none of us want to see.
"On the other hand, what we don't want to do is to push families into poverty. And that's the balance we're trying to get. The anxiety is that at least in London that balance hasn't been struck."
London is affected by the benefit cap more than other parts of the country because property prices are so high. The £26,000 limit has a much larger impact on those receiving benefits in the capital.
Ministers have argued the cap will push people into work and that the changes are part of a 'fairer' way of allocating welfare.
Bullock said it would be harder for the affected families to find work. "If you push people out of London then they're not going to be able to afford the travel costs to come in and do the essential jobs we need doing in the cities," he added.
There has been an overall rise in the usage of bed and breakfast accommodation of over 40%. Westminster council has over 100 families forced to rely on B&Bs.
"What I'm being told is we simply cannot find the larger properties for families with three or four children in the private sector," Bullock said.
"The pressure on our own stock is great at the moment. We're working with private sector landlords in the local area to try and come to arrangements to release more property that we can use."
He warned that the problem is a structural one, where the cost of accommodation has reached an unsustainable level.
"In the longer term, London needs more housing for rent," Bullock said.
"We just don't have enough housing."
The Department for Work and Pensions said that the government had provided £190 million of extra funding to help councils cope with the benefit cap transition - and that the change would incentivise households to find work.
A spokesperson said: "It cannot be fair that benefit claimants can receive higher incomes than families who are in work. The benefit cap sets a clear limit to what people can expect to get from the benefits system and will tackle the problem of welfare dependency.
"Universal credit will also provide clear incentives for people to get back into work – by ensuring they know they are better off in work than on benefits and will directly lift 900,000 people out of poverty."