When a house is inherited the owners are entitled to live in it whether they have residential qualifications or not.

Only when it is sold or subject to a lease agreement can housing regain control of the property.

The loophole has existed since the 1940s, but has recently become a cause for concern because of housing demand.

The Housing Committee said in some cases companies have used the loophole to enable former essential employees to stay on after five years, and some locally qualified tenants have been moved out so others can live there and pay more rent.