Some of the most valuable property in the country is being transformed into overcrowded slums by the illegal sub-letting of flats, residents say.

Single-bedroom apartments on the Hyde Park Estates in Paddington – home to former Prime Minister Tony Blair – sell for close to �500,000, with two-bedroom flats selling for more than �1million.

It is said many are being used by tenants who illegally claim housing benefit while renting the properties out to foreign nationals receiving private healthcare in the area.

Jack Gordon, 69, owner and founder of a public affairs company, and resident of The Water Gardens flats, at the junction of Edgware Road and Sussex Gardens, said: “It is essentially the kind of slum landlordism that should have died out with Peter Rachman [a Notting Hill landlord in the 1950s and 1960s known for his exploitation of tenants].

“Sometimes you get six, seven or eight people occupying a one- bedroom flat.

“When people are staying for a short period of time there is a lack of neighbourliness and care for the community they live in.

“That means noise late at night, people dumping rubbish in the corridors and smoking hookah pipes on the landings.”

He said his flat, which was sub-let before he moved in, required �30,000 worth of repairs for damage left by previous occupants.

Bookseller Leslie Roberts, 80, of Devonport flats, in Southwick Street, said: “They dump rubbish in the corridors outside their homes, even food waste.

“A lot of the children keep pressing the fire alarms to the extent that we’ve just started to ignore them when they go off. There was one sub-let flat which caught fire and was totally burned out.

“The building is overcrowded and damaged, and there is a real problem with noise.”

The issue of illegal sub-letting, which costs Westminster Council millions in benefit payments, was raised at the Conservative Party Conference last week after a two-year investigation.

Abbey Road councillor Lindsey Hall, presenting a report to the conference, called for tougher enforcement to clamp down on the 1,112 Westminster Council properties believed to be sub-let.

Cllr Jonathan Glanz, Westminster cabinet member for housing and property, said: “This is serious organised fraud which is preventing somebody else from having a home, or taking money out of a budget that is supposed to provide for people in genuine housing need.”