Telford & Wrekin Council is to call on the Government to urgently review the way in which it funds the provision of Housing Benefit.
It said that supported accommodation would directly cost the council more than £900,000 in the current financial year.
A motion from Councillor Paul Watling said a review should ensure that councils were fully reimbursed for this benefit which local authorities administer on the Government's behalf.
"It has been acknowledged by the Government that the current system for the funding of additional housing costs associated with supported accommodation is in urgent need of reform," he said.
"The current system means that councils are not fully subsidised for the Housing Benefit it pays to some of these types of accommodation, where often the rent can be significantly higher than that charged in mainstream accommodation.
"If a landlord is also the provider of care, support or supervision to their tenant then there is no cap on the amount of rent they can charge and we have to pay that rent.
"Some provide the bare minimum of care support or supervision yet charge extortionate rent that we are obliged to pay.
"Numerous Government reviews over more than a decade have concluded that the whole scheme needs urgent overhaul, yet to date there has been no definitive action.
"Over the last decade we have seen the number of units of supported accommodation rise significantly, and the average housing costs increase exponentially. For 2022/23 we forecast that these schemes will directly cost the council and the local taxpayer over £900,000. This sector of housing is only set to expand further in the future, and the financial impact on councils is untenable in the current economic climate."