Changes to housing benefit could lead to a surge in homelessness which would cost the Government £120 million a year, a housing charity has said.
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. It warned the cuts could be a "recipe for destitution" for up to 800,000 people.