A ‘chronic shortage' of affordable housing is forcing local authorities to spend £2m a day on temporary accommodation for homeless families, council leaders have warned.

The Local Government Association (LGA) has called on the chancellor to use this week's Budget to free councils from borrowing limits hampering their ability to build new homes and to adapt welfare reforms to protect families at risk of homelessness.

It said the number of households councils have been forced to place in temporary accommodation had increased by 50% since 2010.

Councils have spent £2.6bn housing people over the past three years and it is estimated 75,000 households are currently in temporary accommodation.

‘With councils continuing to face huge financial pressures, it is unsustainable for them to have to spend £2m a day to house vulnerable people at the sharp end of our housing crisis,' said LGA chairman Lord Porter.

‘Councils would much rather invest this scarce resource in building new affordable homes and preventing homelessness happening in the first place.

‘A renaissance in housebuilding by councils and a plan to reduce the squeeze on household incomes are both needed if we are to stand any chance of solving our housing crisis, reducing homelessness and the use of temporary accommodation, and sustainably reducing the housing benefit bill.'