Brighton and Hove Council has been given a stark warning to stop putting families in bed and breakfast accommodation or face court action.
According to figures released by the Office of the Deputy Prime Minister, 219 families were living in B&Bs paid for by the council at the end of last year.
Under new rules coming into force next month, that will effectively become illegal.
Lord Rooker, Minister for Homelessness, warned local authorities would have to improve if they wanted to avoid being hauled before a magistrate.
He said: "The long-term use of bed and breakfast hotels for homeless families with children is the least acceptable and most expensive form of temporary accommodation."
"From April, the use of B&Bs will be outlawed and those failing to comply could face a legal challenge."
The new laws will make B&B accommodation acceptable only in emergencies and even then, for a maximum of six weeks.
If councils break the rules, homeless families will be able to claim legal aid and take them to court. If they win their case, the local authority would be ordered to move them to better housing.
The law was passed after fears children in particular were suffering from living in cramped B&Bs for months or even years at a time.
Experts say this damages health and stops youngsters playing or doing homework.
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