One in four households in England found to be homeless or under threat of homelessness last year were in paid work at the time, an Observer analysis of government figures reveals.

Data published last week showed that, of more than 260,000 households facing a homelessness crisis, more than a quarter of applications for council support were made by a household member who was in paid employment at the time. In some areas, the proportion of working households facing losing their homes was much higher, reaching more than half in one council, Rutland in the East Midlands.

The findings were condemned by Polly Neate, the chief executive of Shelter, who called on the government to build more social housing and urgently increase housing benefit to allow more people to rent. “We regularly hear from distressed people who are facing the unforgiving reality of holding down a job while having nowhere stable to live. Despite working all the hours they can, too many people have been pushed into the housing emergency by expensive private rents, punishing housing benefit cuts and a chronic lack of social homes,” she said.

“The only way politicians can fix this crisis is with a clear commitment from every party to deliver three million more social homes over the next 20 years. And in the meantime, the government must urgently increase housing benefit so that people on low incomes can access at least the bottom third of the private rental market.”

The only way politicians can fix this crisis is to deliver three million more social homes over the next 20 years Polly Neate, Shelter

Under the Homelessness Reduction Act, which took effect in April 2018, councils are required to take preventative measures where households are at risk of homelessness, and relieve it when it occurs.

The figures showed that, of the 42 households for which Rutland council accepted a prevention or relief duty, just over half were in work, with almost half in work in Eden in Cumbria, Richmondshire in North Yorkshire and Broadland in Norfolk.

While these rural districts have relatively low levels of homelessness, Newham council in east London accepted homelessness duties for 1,802 households, of whom more than 40% were in work. In recent years, local housing activists such as the Focus E15 campaign have accused the council of failing to refurbish derelict social housing blocks.

Rokhsana Fiaz, mayor of Newham, said: “This situation has not been created by the policies of the council. It is the tragic result of central government’s relentless austerity drive, their attack on social housing and cuts to local government grants.” She added the council was reducing rough sleeping, as well as investing in new social housing and renovating derelict estates.

In-work households made up 31% of cases in south-east England and 30% in London and the east of England, compared to just 17% in the north east, where housing is cheaper.

Overall, councils in England recorded 118,700 households as homeless and a further 145,020 as being under imminent threat of homelessness in 2018-19. Of those, 71,210 applications for council support were made by a household member who was in paid employment at the time, divided evenly between full-time and part-time work.

The figures are based only on the employment status of the household member who applied for support – so if the applicant was unemployed but another household member was in work, the government data will not pick this up. As a result, the impact of homelessness on working households is likely to be higher than the figures suggest.

Frances O’Grady, the TUC’s general secretary, said: “No-one should face homelessness in the UK. It’s shocking that so many working households face losing their home. It’s the result of a crisis of low pay and insecure work, with too many workers not knowing if they’ll make enough money from one week to the next. Britain needs a real pay rise to £10 per hour as soon as possible. We need cuts to housing benefit reversed. And we need exploitative zero-hours contracts banned once and for all.”

Darren Baxter, the housing policy and partnerships manager at the Joseph Rowntree Foundation, said: “It is totally unacceptable that a large number of working families are being locked out of our housing market. It undermines what we stand for as a society that low-paid, insecure work, unaffordable rents and a lack of support from our social security system are trapping people into poverty and homelessness.”

A government spokesperson said: “Our Homelessness Reduction Act is helping people earlier so they are not having to experience homelessness in the first place and we have invested £1.2bn into tackling it head on - our Rough Sleeping Initiative is also helping reduce rough sleeping by a third in the areas with it in place.”