Communities Scotland inspected the council's housing department

The local authority is currently spending �1.2m annually on bed and breakfast accommodation for those officially classed as homeless.

Communities Scotland inspected housing management practices, asset management and homeless services.

It has since written to the council urging changes to address the issue.

The council is set to meet on Monday to discuss suspending the allocation of council housing in the area - except for those classed as being in the greatest need.

Figures show more than 12,500 people are waiting for a council property in the district.

The review's findings were revealed by housing convener Gerry Goldie, who blamed the problems on the council's former administration.

He said the current housing allocation system was being updated to address problems associated with accommodating people in bed and breakfasts.

'Factual inaccuracies'

He said: "We have about 600 people in the local authority area classed as having a priority need.

"The council's housing allocation system will have to be looked at in order to clear this back log.

"On Monday we will begin the process of putting in interim emergency arrangements to deal with this."

Mr Goldie acknowledged the situation would result in tenants who may have been on waiting lists for decades being over-looked to make way for those classed as priority cases.

In response to the criticism, council leader Linda Gow questioned the report's observations.

She said: "It would be premature to comment in detail on the Communities Scotland draft before it is finalised.

"The council believes the draft currently contains some significant factual inaccuracies.

"We will be challenging these robustly as we do not believe that their initial observations are a fair reflection on our services and we would hope that our comments are reflected in the final report."