Thousands of Lambeth residents face being forced from their homes in to “ghettos” by planned cuts to housing benefit, it is predicted.

Some 5,470 households living on low incomes in privately rented accommodation face a reduction in benefit they can receive from 2013, according to new statistics obtained by Streatham MP Chuka Umunna.

Under the cuts proposed to the Local Housing Allowance in June's budget, housing benefit claimants' entitlement will reduce from 50 per cent of local rent levels to 30 per cent, while a new maximum allowance will be applied.

Some 1,520 Lambeth households living in two bedroom properties will see their housing allowance fall by an average of £25 a week – totalling £1,300 a year.

David Orr, Chief Executive of the National Housing Federation said:“The housing benefit caps could see poorer people effectively forced out of wealthier areas, and ghettoised into poorer neighbourhoods.”

Mr Umunna said because property prices and rent levels were higher in inner London, Lambeth residents would be disproportionately affected.

He added: “I am deeply concerned that people in Lambeth will be made homeless or forced to leave the area as a result.

“The Lib Dem Tory coalition Government said it would implement public spending cuts in a way which would not heavily hit the poor and vulnerable - it is doing precisely the opposite with these measures.”

A spokesman for the Department of Work and Pensions said: “There is an urgent need to reform housing benefit and it’s right that we return fairness to a system that is out of control.”

"Anyone claiming Housing Benefit in the private-rented sector who needs to look for more appropriate accommodation will still find that nearly a third of properties on the market will be within their price range, and we’ve tripled our Discretionary Housing Payments to provide a safety net for the most vulnerable."