Central Brighton and Hove could become a haven reserved for the wealthy unless housing benefit is increased.
A new report says changes to housing benefit are urgently needed to avoid social exclusion and reduce homelessness in the city.
The Brighton and Hove City Private Sector Housing Forum has produced a housing benefits manifesto for discussion.
Landlords, tenants, leaseholders, councillors, advisers, health officials, police, Brighton Housing Trust, universities and housing associations are represented on the forum, which was set up ten years ago.
The manifesto says rents assessed for housing benefit must reflect market values and be kept up to date.
The greatest problem is in the centre of the city, where housing is expensive.
The manifesto says: "Accommodation in these areas becomes less affordable to people on low incomes and can lead to social exclusion and a separation of communities."
Councillor Tehmtan Framroze, who chairs the forum, said: "It is a big issue. I believe the Government needs to be reminded of the problems.
"The manifesto will be reviewed in the light of recent changes to housing benefit and is up for discussion."
Housing benefit fraud in the private rented sector has been exaggerated and unsubstantiated, according to the report.
This led to a climate which allowed unpopular measures to be introduced to recover overpayments.
The manifesto says: "Landlords deeply resent being made liable for debts not of their own making. This also works against tenants' interests as this is one of the most powerful disincentives for landlords to let to claimants."
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