The move, announced by John Gummer, Secretary of State for the Environment, will be particularly welcome in seaside towns, where once-elegant hotels have become troublesome eyesores.
In many resorts former hotels and guest houses had become what are sometimes called "benefit hostels".
"Where these are badly managed, or where there are simply too many of them, there is often considerable nuisance and sometimes real danger. Such wholesale changes can alter the whole character of an area and damage the tourism industry, upon which many such seaside towns exist."
Speaking during the Second Reading of the Housing Bill, Mr Gummer promised amendments to enable councils to close down problem "houses in multiple occupation", without compensation. Councils will also be given powers to prevent new HMOs opening.
Much of the acrimonious debate on the Bill centred on its impact on the homeless. Frank Dobson, Labour's environment spokesman, said it was a "nasty, mean-spirited" measure which attacked homeless people. Mr Gummer, meanwhile, maintained it was about treating everyone on the housing waiting list equally.
Responding to a newspaper advertisement from housing charities, the Secretary of State said it was not a fair system to have several queues. "Everyone should be lined up together."
The Bill proposes a single waiting list route into local authority and housing association homes. Families and the vulnerable would be given a minimum of one year's accommodation. But Mr Gummer said others might actually be living in far worse conditions.
"This Bill ensures people are judged according to their needs," he insisted. "To each according to his need - or is this another thing that the Labour party have thrown out?"
Other provisions give more housing association tenants the right to buy, leaseholders greater protection, and council tenants a chance to vote for new social landlords able to use private money for improvements.
But little of this impressed Mr Dobson who said the Bill combined "Tory mean-mindedness and a lurch to the right". Instead of helping the victims of their policies, the Government was blaming them. "Faced with enormous queues for council and housing association homes, the Government isn't trying to shorten the queues by building more homes. Instead they propose just to rearrange the queue and hope that in the process the people affected will start blaming one another and that it might also distract attention from the Tories' record."
Instead of finding families somewhere decent to live, the Government was proposing to force them to live in "perpetual insecurity," Mr Dobson said.
He held up as the epitome of Tory policy the Clarendon Court Hotel, in Westminster, claiming it was occupied by 158 families living in "squalor".
"But the landlords won't be living in squalor. They're getting pounds 750,000 a year - pounds 14,000 a week - of taxpayers' money."
He said the hotel was infested by cockroaches and there were only six electric cooking rings shared by residents of 48 bedsitting rooms. "This Housing Bill doesn't propose to do anything to improve the living conditions of these families, nor does it propose anything to help them get somewhere better to live. Quite the reverse - it's likely to force them to stay there longer."