Councils in England have warned spending on temporary accommodation is threatening to "overwhelm" their budgets.
A total of 96% of District Councils Network (DCN) members reported an increase in the use of temporary accommodation, with four-fifths (80%) saying the rise is "significant" and causing budgetary strain.
A DCN letter to Chancellor Jeremy Hunt - seen by Sky News - said an "unprecedented number" of people are turning to councils as a last option when they face homelessness.
"Our situation is becoming untenable," it said. "The ensuing increase in costs is a critical risk to the financial sustainability of many local authorities."
The group called for financial support in the form of increased housing benefits and homelessness prevention grants, and is seeking a review of rental policy.
If support is not forthcoming, other services could suffer and homelessness supports could decrease, the DCN letter said.
"The danger is that we have no option but to start withdrawing services which currently help so many families to avoid hitting crisis point," the letter adds.
"There will also be a knock-on impact on other cherished council services, which councils could also have to scale back, and on other parts of the public sector - such as the NHS - which will be left to pick up the pieces."
Analysis released last week from the Local Government Association showed "at least" £1.74bn was spent supporting 104,000 households in the year ending in March - the highest amount since records began in 1998.
The issue has been caused by falling supplies of permanent, affordable housing and worsened by rising cost of living pressures, the DCN letter said.
"Some areas also experience added pressure due to the placement of asylum seekers in local hotels and other temporary accommodation," it added.
The DCN is a cross-party network of 168 district and unitary councils, covering 36% of England's population and 53% of the country by area.
District councils assume control of housing, waste collection and planning, while county councils are tasked with education, social care and education.