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A Welsh Government minister and the head of a Welsh think tank today criticised a reported plan to move thousands of London’s homeless families into temporary housing in Wales.

Preparations by London councils are already underway to send their homeless to housing outside of the English capital as it becomes impossible to find housing priced within the Government's housing benefits cap within the capital.

The Guardian newspaper reported that councils are acquiring properties in counties outside of London to accommodate “an expected surge in numbers of vulnerable families presenting as homeless”, including Merthyr Tydfil borough.

Victoria Winckler, director of the Bevan Foundation – which tackles poverty and inequality in Wales – described it as a sign of “the system gone crazy” and that “buying cheap houses in Wales is not the answer”.

And Wales' housing, regeneration and heritage minister Huw Lewis said: "[This] is exactly what we have been warning of in terms of the impact the of the UK Government's savage cuts to housing and other benefits.

"Local authorities do not possess the details of which local area a housing benefit claimant has come from.

"However, I am very concerned about the potential for a significant increase in the movement of homeless households into Wales as a result of placement by English local authorities who are no longer able to afford to house them in London and parts of the south East due to higher rents and that UK government's housing benefit cap.

"We are already in the midst of hugely challenging times in terms of meeting the housing need of Welsh people and this will only be exacerbated if local authorities in England are being forced to send people out of area in order to meet the UK government's new regime. I will be commissioning an urgent review to identify the scale of the problem that we could be facing."

Local authorities in London say the combination of rising rents in London and the introduction of government-imposed benefit caps in April 2013, would leave them with no choice but to move “poorer families” into “cheaper areas” of the UK due to a lack of “suitable private rented temporary accommodation for larger families”.

Councils are acquiring properties in counties outside of London to accommodate “an expected surge in numbers of vulnerable families presenting as homeless”, including Merthyr Tydfil.

The solution however, Ms Winckler argues, is not “to ship people down the M4” but to provide affordable housing in London and having a benefits system that allows for exceptionally high housing costs in some places. She said: “London councils are clearly desperate – rents are so high in the capital that it is very difficult for families who are either unemployed or in low-paid jobs to find somewhere affordable to live.

“But buying cheap houses in Wales is not the answer. It doesn’t help London families to be housed hundreds of miles away.

“And an influx of families uprooted from their friends, schools and services doesn’t help people in Wales either – there are already thousands of people in Wales looking for an affordable home, and this will only add to pressure on Wales’ schools and public services and increase the already high numbers of people relying on benefits here.”

Seventeen local authorities in London have said they were already placing homeless families outside the capital, according to the Guardian.

And while MPs are expected to debate regulations surrounding the benefit cap at a Commons legislation committee meeting today, a new study published by the charity Child Poverty Action Group (CPAG) and Lasa has warned that homeless residents could mount legal challenges on the basis that a move outside of the city could “impact on their health or their children’s education”.

John Puzey, director of Shelter Cymru, said that the decision would also put pressure on struggling Welsh services, including schools.

He said: “It is clear that the hugely inflated rents in London are putting the city’s councils under extreme pressure when it comes to housing, but dispersing homeless people across Britain can’t be the answer.

“Services across Wales are all struggling and this is compounded by the drastic shortage of affordable homes and the impact of benefit cuts. Just about everyone in Wales who receives housing benefit is going to have to make up a greater shortfall between their benefit and the cost of their rent.”

An estimated 40,000 tenants are going to be hit by next year’s “bedroom tax” and around 91,000 households are on waiting lists for council and social housing.

Mr Puzey continued: “If this goes ahead, we will end up in the bizarre situation of local authorities competing with one another for an increasingly scarce resource and the losers will be those people – many of whom are in work but on incomes too low to meet their housing costs – stranded without a secure, affordable home.”

A Welsh Government spokesman said: “It is neither acceptable, fair nor necessary for local authorities to place families far away from their area.”

Nobody was available for comment at Merthyr Tydfil council.