The use of bed and breakfasts to house homeless families beyond the legal time limit has risen by 800% since the coalition took office – with a third of the country's councils unlawfully placing adults and children in B&Bs for more than six weeks, new figures reveal.

An analysis shows that local authorities across England are now spending on average up to £650 a week to keep people off the streets. Freedom of information requests by Labour to 325 councils, to which 242 responded, reveal that 125 had resorted to placing destitute families in hotel rooms for six weeks or more since April 2010. This figure challenges claims by ministers that only a "small number" of town halls put families in bed and breakfast accommodation beyond the legal limit.

Charities and councils say a combination of welfare cuts and lack of affordable housing has led to the almost ninefold increase. The latest figures show 900 adults and children had been housed in B&Bs for a month and a half at a time, often sharing a single room without a kitchen or any meaningful storage space.

Guest houses and hotels are meant to be a short-term solution while families wait for council accommodation, and local authorities are flouting the law when they families stay for more than six weeks. Such decisions are subject to judicial review...