Luton's Purley Centre flats due to be demolished
A block of flats in Luton used by the borough council to house homeless people is due to be demolished once alternative accommodation is built
The 1960s Purley Centre block in Marsh Farm is now home to 57 families.
Recently another 40 families were being housed in a hotel at a cost to the council of £50,000 a month.
The borough council is building 209 new homes and has invited private landlords to bid for a temporary accommodation contract worth £28m over four years.
A council spokeswoman said the Purley Centre flats had been "refurbished up to acceptable standards for the duration of their use, in response to an urgent need to accommodate homeless families".
She added: "This is only a temporary measure until we have received planning approval for our proposals to redevelop the Marsh Farm central area, creating in excess of 100 new permanent homes.
"The current building will then be demolished as part of the redevelopment programme."
Currently 780 homeless households are in temporary accommodation in Luton, where the council is believed to be England's biggest user of private landlords outside London.
Tom Shaw, who is the councillor in charge of housing at Luton Borough Council, said bed and breakfast accommodation was not ideal for families.
"It's not nice for the homeless families and their children whose schools may even be on the far side of town from where they are now living," he said.
"About 18 months ago we looked in to working with private landlords."Green Belt limit
Now the council has invited landlords to tender for a contract to provide temporary accommodation.
The council is also building 209 new homes - the first in the borough for two decades - but it admits 2,500 are needed to meet demand.
The authority said it did not have a "disproportionate number of homeless households compared to similar boroughs of size and urbanisation".
"Indeed the numbers that Luton accepts as homeless is broadly similar to Bedford Borough Council, one of our partner authorities," a spokesperson said.
"Luton is a landlocked borough, completely enclosed by either Green Belt or areas of outstanding natural beauty.
"This leaves the situation that potential for growth is hindered and only small infill developments of brownfield sites present for any housing.
"We have a larger proportion of households occupying temporary accommodation for longer periods than other authorities, thus presenting the image that we have a disproportionate number of homeless households," the spokesperson added.