Homeless people are being re-housed into three and four star hotels at Westminster council's expense.
Bills for some families in Westminster have topped £12,000 per month with the council paying out more than £2m in the first nine months of last year.
The council says government limits on the amount people can claim in housing benefit have led to a rise in the numbers becoming homeless in the area.
But the government said Westminster Council's behaviour was "unacceptable".
Councils have a legal duty to re-house homeless people.
With fewer homes available in the private rented sector, Westminster Council has turned to hotels to house some families.
BBC London spoke to families at the Jury's Inn Hotel in Chelsea, in west London, and at the Copthorne Tara Hotel in Kensington.
Many had been there for months, despite the law saying that people should only be in bed and breakfast accommodation for a maximum of six weeks.
The Osman family have been at the Jury's Inn since the start of November, after changes to their housing benefit left them unable to afford the four-bedroom home they rented. They now share three rooms at the hotel.
"It's very hard," says father, Ali Sharif Osman."
"We don't have a cooker, we don't have a fridge so we have to go out and buy takeaways every day.
"The hotel is also further from the children's schools".
He says the family used to receive £700-a-week in housing benefit until that was capped.
BBC London was told the taxpayer is paying £350-a-night to house his family at the Jury's Inn Hotel.
Another invoice seen by BBC London shows the bill for a family of four, being housed at the Copthorne Tara Hotel in Kensington came to more than £12,500 for a month.
The taxpayer had previously paid just over £3,000 in Housing Benefit for the family's previous home.
Westminster Labour MP Karen Buck called the situation a "scandalous waste of public money" and said it was a bad deal for both the taxpayer and the families involved.
Westminster City Council said it was dealing with an unprecedented demand for homes in the borough and that it had no choice but to use the hotels to house homeless people.
In the last year it has re-housed around 600 families, some of them out of the borough, and says it is working as quickly as it can to re-house those still in the hotels.
Housing spokesman councillor Jonathan Glanz said: "The scale of the problem is unprecedented.
"We have large numbers of people presenting as homeless and we don't have the ability immediately to put them into self contained units or into social homes immediately.
"While their needs are being assessed they go into short-term accommodation but our aim is to move them on to something more permanent."
Liberal Democrat Communities minister Don Foster said: "Having provided [Westminster Council] with the additional resources to be able to tackle this problem, they should be using these effectively as around half of the councils in London are already doing.
"What they're doing is unacceptable and a waste of taxpayers' money."