Munira, 32, and her partner, Assad, 34, moved into their home a year ago, when she was heavily pregnant with their first child. They had struggled to find a flat they could afford, as their minimum-wage jobs in a smart central London hotel meant their budget was restricted. In the end they signed a contract for a compact studio flat, for £580 a month (£600 with Wi-Fi).

But their "compact studio flat" is actually a converted garage at the back of a Victorian terrace, a thin sheet of chipboard nailed over the place where the roller-shutter garage door used to be, a minute kitchen and bathroom plumbed into the tiny space.

This is where their daughter has spent the first eight months of her life, in a cramped room, almost entirely taken up by the double bed and fridge, a bare bulb on the ceiling. The ceiling is low, naturally, because the space is designed for a car, and there is only a small window cut into the side wall. The garage roof is not great when it rains, and most of the leaks seem to come through the bathroom ceiling, which is cracked and patched with stains and mildew. There is no space for the baby to crawl.

Converted garages are the latest solution offered by enterprising landlords at the bottom of the housing chain to the ever-increasing pressure for affordable housing in London. Planning officials in this east London borough, Newham, have been targeting the proliferation of converted garden sheds for four years, and are now turning their attention to the newer phenomenon of cheap properties rented in industrial outbuildings and domestic garages.

Although its appearance has been disguised, officials know this is a designated garage, pointing to the dropped kerb, the sloped pavement that allows a car to drive out without a bump. The garage has its own entrance on to the street (a cheap, whitewashed plywood door). Munira knows the home is not ideal. "It's not suitable, but property is quite expensive in London." She is five months pregnant with her second child and wants to move out before the next baby arrives.

Her husband (resting after a night at the hotel) gets up so that there is room to show the flat. "There's the kitchen, the bathroom and this lovely room," she laughs. "There's nothing good about it."

She thinks for a while, trying to think of something positive to say about their family home. "It's quiet. There are no neighbours." It doesn't get cold because they have a radiator on all the time and, because the flat is so small, it heats up very quickly.

Munira inside the converted garage. Photograph: Frantzesco Kangaris/Frantzesco Kangaris for The Guardian

She doesn't like "the damp, the low ceilings; there's not enough sunlight. It's dark, too dark. In the summer, there's less light." It is too small to ask her family over. "My mum came once, but she said it was suffocating in here," Munira says.There is room for only one person to stand in the kitchen, like a galley kitchen on a barge.

"We had no choice. We're on a tight budget. We thought we would be here for four or five months, save some money and then move. But my husband is working on a minimum wage. We don't want to live here. We are stuck in this place," she says.

Munira grew up in Newham and her family are still in the area. Her husband came here from Pakistan five years ago, and has been working in the hotel industry ever since, as a housekeeping supervisor, on night shifts, earning £850–£900 a month. The landlord has recently been asking for £50 a month more in rent, which they are unable to pay."He threatened to cut off the water and put our belongings on the street. I said, 'I'm pregnant.' I told him I'd call the police," she says.

So far the family has had no help from the state. When Munira went to the local council housing department for help she was told to "look for a house in Leicester".

Assad has no intention of going so far from London, pointing out that he has a good job here, and little confidence that he will find another one if leaves the capital. But finding somewhere more suitable to live in London has proved very challenging, despite his job at a four-star hotel. He shuffles a small pile of estate agents' cards, collected during recent attempts to move. The main problem is his low wage.His research shows that a one-bedroom flat in the area costs between £900 and £1,000; a studio flat is also beyond their budget.

"If you get £10 or £11 an hour, it's OK – you can survive. On £6.31 you can't survive," he says. Other challenges are the cost of moving and the demands for guarantees from landlords.

"You need one month's rent, a one-month deposit and a property fee. You can't afford to move. You need a guarantor. Where will I find a guarantor?" Munira wonders.

Christine Lyons, a planning officer with Newham council, looks at the garage with some dismay. "It is not built as a dwelling. There's no heat-proofing, no roof insulation, no proper windows," she says, adding that greater regulation of landlords is vital if London is to avoid developing areas reminiscent of the slums of Kolkata. She is struck by the high rent being charged, and points out that often properties at the bottom of the housing market command surprisingly high rents, because tenants are unable to supply the deposits and guarantees that less disreputable landlords demand. "Obviously there is a housing crisis but, just because there is a housing crisis, that doesn't mean that people should live in rubbish. Some of the rents we see are not dirt-cheap – this is not an affordable price. They're often not much cheaper than what you might pay for a nice place."

Despite the work Newham has done to try to curb illegally rented outhouses, inspecting about 300 properties a month, the number remaining is substantial. "We are still finding new outbuildings that have been converted. It is still not under control," she says.

Munira is despondent about the situation she finds herself in. "I'm living in a garage. If you can't afford to live in your own country, what is happening in London? I'm quite disappointed to be living this way."

Since this interview Munira and Assad, who asked for their surname not to be printed, have been evicted by their landlord and have been rehoused in emergency bed-and-breakfast accommodation