Councils being hit first by the benefits cap plan to lobby the government over fears they will be disadvantaged by the surprise move.

The government announced on 20 December that the £26,000 total household benefits cap will only apply to four councils, Haringey, Croydon, Enfield and Bromley, from 1 April and not to everywhere at the same time as widely expected. At least one, Croydon, is considering legal action to prevent the move.

Instead, the Department for Work and Pensions will phase in the transition over six months.

The four London councils - two Labour-led and two Conservative-led - are considering coming together to warn the government the move will make it more difficult and costly for them to house homeless families in temporary accommodation.

This is because other surrounding boroughs unaffected by the cap will be able to afford to place people in accommodation in the ‘capped’ boroughs, potentially leading to a shortage of suitable homes in the affected boroughs.

Ahmet Oykener, cabinet member for housing at Enfield Council, said: ‘Our homeless families will be competing in a highly competitive private rental market with residents from other London boroughs and elsewhere who will be able to pay higher rents.’ 

Mr Oykener warned addressing this could cost ‘millions of pounds’ and said the borough will lobby the government to ask the DWP for extra funding.

Croydon Council is also concerned.Jon Rouse, chief executive of Croydon Council, this week confirmed the four boroughs are talking about how to ‘relay our concerns back to the government’.

Mr Rouse, in an interview with a local news website, said the council would take legal advice about whether the decision can be challenged.

Bromley and Haringey councils confirmed they are looking at the impact of implementing the cap.

Steve Bullock, executive member for housing at umbrella group London Councils, said: ‘There are considerable risks attached to neighbouring boroughs proceeding on different timetables and as yet this has not been taken into account.’

The four boroughs were chosen partly for administrative reasons as their benefits are all administered from a central office in Stratford.

A spokesperson for the DWP said the department is working closely with the boroughs ‘to look at the additional costs’ they may incur.