Council tenants who sublet their homes to rake in thousands of pounds face prosecution and possible prison terms in a New Year blitz on abuse of social housing.
High earners could also be forced to pay the market rate for continuing to live in their council homes.
Housing minister Grant Shapps told the Sunday Telegraph it was a "scandal" that abuse of the council and housing association sectors was costing taxpayers between £5 billion and £10 billion a year.
The coalition is expected to launch new consultations ahead of legislation. Any money saved would go towards building new social housing.
It is not currently an offence to sublet a council house - a loophole that allows an estimated 160,000 tenants to move out and take rent from someone else.
Ministers are also set to give local authorities powers to make wealthy council tenants pay much closer to the market rate. If they refuse, they face eviction.
Last year, Government officials estimated there were up to 6,000 people in social housing who had incomes of more than £100,000.
Around 1.8 million families are on council house waiting lists. In England and Wales, around eight million people live in four million council or housing association homes.
Mr Shapps said: "Why should someone on a six-figure income enjoy a fantastically subsidised rent, while those in real need languish on the waiting list?
"And why is it so easy to get away with subletting your council house at market rent and pocketing up to a £1,000 a week at taxpayers' expense?"