Welfare bills will rise as a result of the government's housing cuts, the National Housing Federation has warned.
It says increasing rents by up to 80% of the market rate to pay for new homes will mean more tenants having to rely on housing benefit to pay them.
Reforms include a £400-a-week cap for the largest homes which critics say will force people out of big cities.
The Mayor of London Boris Johnson has been criticised for saying he would not allow "Kosovo-style social cleansing".
The National Housing Federation's chief executive David Orr says the welfare bill will rise as rents rise.
"The government will have to pay out more in housing benefit, or impose further caps," he says.
"After two or three years, people will say this is unacceptable. The whole policy has not been thought through."
The federation says even if tenants moving into new social homes got a job, their earning would disappear in high rent repayments.
The new rents, therefore, would act as a "powerful disincentive" to work, it adds.
Earlier, the Mayor of London Boris Johnson sparked a row over the reforms by saying he would not allow "Kosovo-style social cleansing" "on his watch".
Business Secretary Vince Cable accused him of using "inflammatory language", while Mr Johnson later said his remarks had been taken out of context.
Several London-based MPs have attacked the proposed new caps, due to come into effect in April and their likely impact on the poorest people living in the capital.
Mr Johnson, who faces re-election in 2012, told BBC London on Thursday: "The last thing we want to have in our city is a situation such as Paris where the less well-off are pushed out to the suburbs.
"I'll emphatically resist any attempt to recreate a London where the rich and poor cannot live together.
"We will not see and we will not accept any kind of Kosovo-style social cleansing of London.
"On my watch, you are not going to see thousands of families evicted from the place where they have been living and have put down roots."
A number of coalition MPs, many representing London constituencies, have concerns about the cap and have called for a rethink on this and other plans such as the 10% proposed cut in housing benefit for people on jobseeker's allowance for more than a year from 2013 onwards.
Earlier this week Labour's Chris Bryant talked about people "being socially engineered and sociologically cleansed out of London" - a remark criticised by Deputy Prime Minister Nick Clegg as deeply offensive to people who had witnessed ethnic cleansing in other parts of the world.
Lib-Dem business minister Ed Davey called on both Mr Johnson and Mr Bryant to withdraw their comments.
"I think Chris (Bryant) and Boris Johnson should apologise," he told BBC One's Question Time.
"The language they are using is appalling. It's scaremongering and their analysis is completely wrong. We should have a grown up and adult debate."
Asked about the prime minister's reaction, No 10 said he "does not agree with what Boris Johnson has said or indeed the way he said it".
Mr Johnson's office later issued a statement saying he had been "quoted out of context" and was confident that negotiations would result in the reforms being introduced with "minimal problems" for London.
Ministers have mounted robust defence of the proposals, arguing that the housing benefit bill had got out of control under Labour and people would still be able to claim a maximum of £21,000 a year.
According to government figures, 21,000 people will be affected by new caps on the amount families can claim for five, four, three, two and one-bed room properties across the UK including 17,000 in London, the majority of whom are out of work.
Housing minister Grant Shapps acknowledged "some people" may have to move as a result but insisted there would be plenty of other properties in their area that would still be affordable under the new conditions.
But Labour has warned that the changes will be "devastating" for hard-working families on low incomes both in and outside London.