The number of homeless children living in temporary accommodation has soared by almost 40 per cent in the past three years, new figures reveal, compounding fears Britain is facing a “catastrophic” housing crisis.

Councils are housing 120,540 children with their families in temporary shelter, an increase of 32,650 extra children since 2014.

Labour’s shadow housing minister John Healey said ministers should "hang their heads in shame" over the "shocking" figures.

"In a country as decent and well off as ours every child should have a home to go to," he said.

“This is the direct result of decisions made by Conservative Ministers over the last seven years – the lowest number of affordable homes for 24 years, no protection for private renters, and big cuts to charity and council budgets."

Temporary accommodation is meant to be an interim solution while residents wait for permanent housing, but charities have warned many families are being left in "limbo" as criteria for so called "priority need" placements becomes increasingly narrow.

Kate Webb, head of policy and research at housing charity Shelter, told The Independent there has been little Government effort to reverse the trend.

"It is completely unacceptable when someone has already gone through the trauma of losing their home to leave them in limbo for months or years in temporary accommodation," she said.

"If we had a functional housing system we would not be putting people in such unstable, precarious living situations."

The Government has placed a six-week limit on families with children staying in temporary bed and breakfast accommodation, but Ms Webb said in practice this limit is increasingly flouted as councils struggle to find families proper homes to live in. There is no limit on how long families can remain in temporary accommodation for.

The causes of homelessness Show all 7 1 /7 The causes of homelessness The causes of homelessness Family Breakdown Relationship breakdown, usually between young people and their parents or step-parents, is a major cause of youth homelessness. Around six in ten young people who come to Centrepoint say they had to leave home because of arguments, relationship breakdown or being told to leave. Many have experienced long-term problems at home, often involving violence, leaving them without the family support networks that most of us take for granted The causes of homelessness Complex needs Young people who come to Centrepoint face a range of different and complex problems. More than a third have a mental health issue, such as depression and anxiety, another third need to tackle issues with substance misuse. A similar proportion also need to improve their physical health. These problems often overlap, making it more difficult for young people to access help and increasing the chances of them becoming homeless Getty/iStock The causes of homelessness Deprivation Young people's chances of having to leave home are higher in areas of high deprivation and poor prospects for employment and education. Many of those who experience long spells of poverty can get into problem debt, which makes it harder for them to access housing Getty Images/iStockphoto The causes of homelessness Gang Crime Homeless young people are often affected by gang-related problems. In some cases, it becomes too dangerous to stay in their local area meaning they can end up homeless. One in six young people at Centrepoint have been involved in or affected by gang crime Getty Images/iStockphoto The causes of homelessness Exclusion From School Not being in education can make it much more difficult for young people to access help with problems at home or health problems. Missing out on formal education can also make it more difficult for them to move into work Getty Images/iStockphoto The causes of homelessness Leaving Care Almost a quarter of young people at Centrepoint have been in care. They often have little choice but to deal with the challenges and responsibilities of living independently at a young age. Traumas faced in their early lives make care leavers some of the most vulnerable young people in our communities, with higher chances of poor outcomes in education, employment and housing. Their additional needs mean they require a higher level of support to maintain their accommodation Getty Images/iStockphoto The causes of homelessness Refugees Around 13 per cent of young people at Centrepoint are refugees or have leave to remain, meaning it isn't safe to return home. This includes young people who come to the UK as unaccompanied minors, fleeing violence or persecution in their own country. After being granted asylum, young people sometimes find themselves with nowhere to go and can end up homeless Getty Images/iStockphoto

"The circumstances are heart-breaking, often these are not safe places to raise children so it is very difficult to have a normal family life," she said.

"You have families that are scared about letting their children used the shared bathroom, or one ludicrous example of a family having their pizza stolen from the oven of a communal kitchen.

"There’s a huge shortage of social housing - that’s been true for many years and there hasn’t been a government effort to reverse that - but people are having to wait longer and longer and what is available is being more heavily rationed than ever."

The figures are revealed after the Local Government Association (LGA) analysed Department for Communities and Local Government (DCLG) statistics.

The latest bleak assessment of Britain's social housing system comes just weeks after the Grenfell Tower tragedy renewed national focus on the crisis and exposed a vast accountability vacuum.

The Grenfell Action Group (GAG) residents' association issued countless warnings to the Royal Borough of Kensington and Chelsea (RBKC) over fire safety concerns at the tower but claimed their warnings "fell on deaf ears".

Five weeks on, just 35 offers of temporary accommodation have been accepted by those made homeless, despite 169 offers being made.

DCLG said many families did not feel ready to accept housing but advocates for those affected told The Independent some offers were wholly unsuitable, including a resident in a wheelchair being offered accommodation which was not accessible.

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Others, whose homes in Grenfell Tower were also temporary, are reluctant to be shunted further down the waiting list for permanent accommodation.

"Offers of temporary accommodation are being made on a daily basis, but we know that families will have concerns around this process and the idea of accepting a temporary home," DCLG’s Grenfell Response Team said in a statement.

"For some people, it’s still too soon to make such a major decision. For others, there are all sorts of considerations to take into account, such as the needs of elderly relatives, proximity to schools, and dealing with historical overcrowding."

Radical Housing Group, a network of housing activists of which GAG is a member, said the latest findings were a "national scandal" and yet more proof the housing system is "fundamentally broken".

"Families are spending years in B&B accommodation, often of a very low quality, and miles away from their work, schools and networks. The sell-off of social housing means there is nowhere else for them to go," a spokesperson said.

"After Grenfell, this is yet more proof that the government needs to initiate a massive programme of buying and building public housing. It needs to make existing homes safe, permanently house those people stuck in temporary accommodation, and put an end to the catastrophic housing crisis.”

Changes to the Localism Act in 2011 gave councils the authority to slash social housing waitlists by allowing them to define their own criteria for priority need.

RBKC cut its waiting list by 75 per cent between 2006 and 2016, from 10,798 to 2,753.

But Ms Webb said the change created a chronic lack of visibility of the true demand of social housing as councils began drastically undercounting the number of applicants.

"The change in criteria means people are increasingly stuck in really unsuitable privately rented accommodation. If you look at the stress factors, shortage of affordable housing, welfare cuts, there’s no real optimism that things are going to change anytime soon," she said.

The number of council homes in the UK has fallen by 165,000 since 2010 alone, with almost a third having been sold to private owners under the Right to Buy scheme.

The LGA said councils are in dire need of extra support from central government to tackle the crisis.

"When councils are having to house the equivalent of an extra secondary school's worth of pupils every month, it's clear the current situation is unsustainable,” LGA housing spokesperson Martin Tett said.

"Councils are working hard to tackle homelessness...we now need the Government to support this local effort by allowing councils to invest in building genuinely affordable homes, and taking steps to adapt welfare reforms to ensure housing remains affordable for low-income families."