The coalition Government is ripping up powers introduced by Labour in April requiring anyone letting out houses to three or more people to submit a planning application.
Tory housing minister Grant Shapps believes that is too much of an administrative burden on officials as well as landlords so is giving councils powers to target restrictions on problem areas instead.
There have long been calls for more controls after complaints from residents about problems with noise, littering and other antisocial behaviour in areas dominated by student accommodation.
They want a more even spread of houses in multiple occupation (HMOs) and the Government has admitted that a high concentration of shared homes can sometimes cause problems, "especially if too many properties in one area are let to short-term tenants with little stake in the local community".
Mr Shapps said: "Councils know about local issues with shared homes, and don't need top-down rules from Whitehall to deal with problems that don't exist.Where too many shared homes are causing problems for other residents or changing the character of a neighbourhood, councils should be able to control their spread.But I'm not going to create unnecessary costs for landlords, which puts the supply of rented homes at risk.Shared homes ensure people who want to live and work in towns and cities can do so, and are vital to the economy."
