Builders appear to have literally tried to fill a gap in the housing market by building a tiny house squeezed between two terraced homes.

Work started on the plywood abode in Manor Road, Leyton, about a month ago, and it has quickly divided neighbours, some of whom welcome the home while others fear it will create overcrowding.

The wooden structure is built on the site of a former garage which was attached to number 105, but does not have planning permission.

However, Waltham Forest Council is yet to determine whether the building constitutes an illegal development.

A spokeswoman said it depends on issues including on whether the structure is temporary or permanent as well as what building materials are being used.

A spokesman added that planning officers are currently investigating the property.

Number 105 has a for sale sign by estate agents Allen Davies, which said it is not responsible for selling the new home, but told the Guardian that it is no longer selling number 105.

A spokesman said: "It's nothing to do with us whatsoever. No-one knows anything about it really. It's a curious structure."

Neighbours said no tenants have been found for the property, which is still under construction, and do not know the owner of the garage or the name of the building company working on it.

Claire Weiss, of nearby Lea Hall Road, told the Guardian she has complained to the council about the building.

The 65-year-old said: “I feel sorry for whoever will live there. People shouldn’t have to live in a space like that, even with the housing crisis.

“Passing by I’ve seen inside when the doors open and you can see right through to the back garden. There’s no dividing wall. It’s a garage with a loft.

“It’s dreadful and it doesn’t fit in at all with the other houses.”

There are 24,000 people on the council’s housing waiting list and, as of March, just 60 empty homes in the borough, many of which have been allocated already.

The council is trying to free up space for housing developments by targeting disused garages.

It has found 159 sites around the borough , and the strategy is expected to create hundreds of homes.

Des Douglas, 64, who lives opposite the development, said: “It’s a bit rough but other than that it doesn’t bother me. It hasn’t been used for years as a garage so why not?

“There’s a shortage of housing so everything helps.”

But neighbour Amin Daly, 68, said: “It’s too overcrowded. We need more homes for families, who will they cram in there? I was really surprised when it started going up. It was a bit of a shock.”

Forest YMCA, of Forest Road, Walthamstow, is trying to tackle homelessness in the borough by trialling use of shipping containers as makeshift homes for young people who cannot afford to rent or buy their own property.

Are you or do you know the builders? Give reporter Joe Curtis a call on 07824 530 127 to have your say