Sandra Munoz finds it hard to sleep at night. Shortly before Christmas she received a letter from her landlord notifying her that the rent on her two-bedroom flat in Battersea, south London, had gone up. As a single mother of one she receives financial help to put a roof over her head. But rather than languishing on the already backlogged waiting list for social housing, she uses cash payments, known as local housing allowance, to put towards renting in the private sector.

But as part of their series of welfare reform packages, the Government has capped the local housing allowance meaning people such as Ms Munoz and her five-year-old son Eduardo are now being evicted.

"If we have to move out of the area it will be like returning to zero for me," she says. "We'll have to start all over again. I'm a single mother and I have a strong support network in Battersea that makes it easier for me to find work. If I move somewhere else I won't have any of that to fall back on."

Much of the debate in recent weeks surrounding welfare reform has centred on plans to cap the overall amount of benefit that a family can receive at £26,000. The bill has floated back and forth between the two houses in Parliament with the Government promising to push it through with or without the support of the Lords.

If the total benefit cap comes in, Britain could experience the largest peacetime movement of families since the creation of the post-Second World War new towns.

Proponents of reform say the moves are necessary to save money and encourage families to pursue work, rather than rely on benefits. Critics say many of the benefits out there help keep parents in work and will push Britain towards a segregated future where the outer rings of expensive cities are populated with the poor while the centre of town is colonised by the rich.

But in many ways that exodus is already under way. The Chartered Institute of Housing estimates that as many as 800,000 homes have already become unaffordable for low-income families now that the local housing allowance has been capped. The new caps came in on 1 January and will, depending on when each person's local housing allowance is assessed, impact households over the next 12 months. Across the country, families are receiving letters saying they must move into cheaper accommodation, wherever that may be.

The new limits currently restrict the maximum amount of housing benefit payable weekly to £250 for a one-bedroom property, £290 for two bedrooms, £340 for three bedrooms and £400 for four bedrooms. The maximum anyone can receive in a year is £20,000.

In many parts of the country the capped allowance is more than enough to find half-decent accommodation. But in London, parts of the South-east, the Home Counties and beyond – where property prices are often extremely high – the caps are making vast swathes of our cities unaffordable to poor families.

Maida Vale, an affluent area of central London is a good example. Like many inner-city London suburbs, social housing is mixed up with Victorian and Edwardian mansion blocks that sell for millions.

Andre Rostant, a hypnotherapist and father of eight, is being evicted because of the housing allowance cap and will likely have to move his entire family outside the city to somewhere in Kent or Essex. "The benefits systems needs reforming and streamlining, I don't think anyone disagrees with that," he says. "But I don't believe it has to be done in such a way where there are such huge displacements across the country." Much has been made of how the benefit caps will primarily target large families, but he believes the Government has used families such as himself to mask a wider agenda.

"This whole policy has been pushed through on the back of propaganda that it's only large families and immigrants that will be affected," he adds. "My family is perfect tabloid fodder but there are single people, small families, people who work up and down the country that will be forced out of their homes."

The Department of Work and Pensions own estimates admit that 31 per cent of families affected by the various proposed welfare reforms will be families with two children or less. Karen Buck, Labour MP for Regent's Park and Kensington North, pictured, is also annoyed that much of the debate has been portrayed as only targeting the perennially unemployed. "The idea that welfare reform is about chasing the workshy out of Knightsbridge is a monstrous caricature," she says. "Between a quarter and a third of recipients of local housing allowances are employed."

Ms Munoz is a good example. She has lived in Battersea for seven years and her son Eduardo goes to school locally. A trained filmmaker, she freelances when she can while looking after her son. The flat is a former council-owned property, one of millions of former social housing units that were purchased by landlords who now rent them back to tenants reliant on local housing allowances. Although Battersea is an up-and-coming-area of London just across the Thames from Chelsea, there are plenty of have-nots living on less than salubrious estates.

The area's popularity, combined with a shortage of housing, has allowed landlords to increase their rents annually. In 2008 Ms Munoz's rent was £250 a month. It is now £350, beyond the maximum £290 a month she now receives through the local housing allowance.

Faced with eviction from a private rented property, she had no choice but to join the social housing waiting list. But there are no guarantees she will be rehoused in Battersea, the closest thing she has to a support network.

"I agree with the idea of a benefits cap, welfare shouldn't be unlimited," she says. "But caps need to be brought in that reflect the reality of circumstances and where you live. If you live in the countryside, £290 a week for a two-bedroom place might work well – in London that gets you very little. When I hear politicians say people won't actually suffer from these changes it makes me realise that they have no clue whatsoever about how people really live."