Grant Shapps said making social housing fraud a criminal offence would help deter tenants from cheating the system. Other proposals would make it easier to detect and punish fraudsters and would encourage social housing landlords to tackle the issue, freeing homes that could then be allocated to those in greatest need, he added.

The consultation on unlawful subletting of social housing follows a pledge by the government in November, when it published the Housing Strategy.

Ministers believe between 50,000 and 160,000 social homes in England are currently unlawfully occupied and the National Fraud Authority estimates tenancy fraud costs £900m a year.

However, subletting and most other types of tenancy fraud are not criminal offences. According to the Department for Communities and Local Government, those caught breaking the rules are generally just required to give back the keys for properties they don’t live in.

Under the plans announced today, social housing tenancy abuse could result in a maximum penalty of two years in prison and a £50,000 fine if a case goes to Crown Court.

The seized proceeds of tenancy fraud would also be reimbursed to the social landlord involved rather than retained by central government as is currently the case.

Councils would be given the power to bring prosecutions for tenancy fraud and banks and utility companies would be obliged to provide them with data.

Shapps said the plans would ensure social housing ‘swindlers’ pay the price for their abuses at a time when more than 1.8 million households are on social housing waiting lists.

‘The proposals I've announced today would not only deliver justice to these fraudsters, but will also act as a deterrent to those who think they can earn a fast buck from this precious resource,’ he said.

‘I want everyone to know that our country's social homes are going to those in genuine need, not providing a “nice little earner” to someone who could afford to live elsewhere.’

The consultation is open until April 4.