MPs could be banned from claiming expenses for renting a home while renting out another property they bought with the help of their parliamentary allowances.
The Independent Parliamentary Standards Authority (Ipsa), which runs the MPs' expenses system, is considering the rule change.
After it emerged that more than 30 MPs were "renting and letting", Sir Christopher Kelly, head of the anti-sleaze watchdog, called for the loophole to be closed. He told The Independent: "There is no rule saying they can't do it. But people should not be fixated by rules. We want people taking responsibility for making judgments about what is right and not right."
The chairman of the Committee on Standards in Public Life added: "It would clearly be wrong if an MP had bought a house to claim mortgage interest at public expense and then rent it out, rent another house and claim the cost of that. Wheth-er the rules say it is allowable or not, it is wrong in principle.
"A very good principle is if you can't explain it in terms readily understood by the public, that is a very strong argument for not doing it."
The committee helped to design the new system brought in after the 2009 expenses scandal, which ended the MPs' ability to claim up to £1,250 a month for mortgage interest from August this year, forcing them to claim for rent or hotels instead if they vacated their homes.
Sir Christopher described "renting and letting" as a "transitional problem". He confirmed that Ipsa was "looking at the issue" and said he would be surprised if the current rules were not changed.
Yesterday, Ipsa said it could not stop MPs renting out a property they own but admitted there was public concern about a small number of cases in which MPs rented to other MPs, and raised the prospect that this practice could be banned. In a report on MPs' allowances, Ipsa said: "We cannot say an MP should not own a property or properties, or restrict what they do with those properties on the open market. The risk, as perceived by some, is if the tenant is another MP, funded by the taxpayer, a rent above the normal rate might be agreed."
Ipsa added: "Despite the limited number of MPs renting from other MPs and the low risk to the taxpayer, there is sufficient public concern to merit a consideration of whether we should prevent such arrangements in future. Prevention would need to focus on the tenant MP, rather than the property owner, over whom Ipsa has no influence."
Options include a new rule to restrict MPs from renting from other MPs or having to make a public declaration if they rent from another MP which would also name their landlord.
Although Ipsa released the details of most member's living arrangements, some 51 MPs were allowed to keep the name of their landlord secret on security grounds.
Details had been removed where an MP or landlord had shown the information could lead to their address being identified.
An Ipsa spokesman said 85 per cent of MPs had their landlords named, but added: "We need to consider in each case if there are any security issues. We take that as seriously as we can."
Commons Speaker John Bercow hasd earlier written to Ipsa claiming there was a "very real danger" that residential addresses could be discovered as a result of the details being released.
'What we want is people making judgements about what is right and wrong' sir christopher kelly