Thousands of unemployed benefit claimants are being “warehoused” in small rooms in terraced houses that landlords are presenting as flats in order to obtain the highest possible housing benefit, a Sunday Times investigation has revealed.

Council officials say the bogus flats, which have been found in London, the West Midlands and Leeds, are costing taxpayers tens of millions of pounds in wasted housing benefits. A two-bedroom terraced house can be divided into up to six rooms with lavatories without planning permission.

Landlords say the units are single rooms for the purposes of avoiding planning enforcement, yet insist they are flats when claiming housing benefit. The housing benefit for a flat can be double that of a room in a shared house for an adult over