Council tenants are to be banned from subletting their properties as the government prepares to introduce criminal offences to crack down on the "scandal" of housing tenancy fraud and abuse.

A small number of council tenants who earn more than £100,000 a year will also face eviction if they refuse to pay unsubsidised rents closer to the market rate.

The changes are being championed by Grant Shapps, the housing minister, who is to launch a consultation process in advance of possible legislation. Shapps wants to target the 160,000 tenants who sublet their properties and the 6,000 social housing tenants who earn more than £100,000 a year.

"For too long this country has turned a blind eye on the multibillion-pound problem of housing tenancy fraud and abuse," Shapps told the Sunday Telegraph.

"This year the coalition is determined to end that scandal. Why should someone on a six-figure income enjoy a fantastically subsidised council rent, whilst those in real need languish on the waiting list?

"And why is it so easy to get away with subletting your council house at market rent and simply pocketing up to £1,000 a week at taxpayers' expense?"

Shapps said a criminal offence was needed for tenants who sublet their properties because the rules were too weak. Penalties could include fines and possibly imprisonment.

"If the sanctions themselves are so weak, the worst that happens is you get that council home taken away from you if you're found out," he told the BBC. "We need to change that."

Ministers estimate that about 1.8 million families are on council house waiting lists. Council rents are about £80 to £110 a week, but can be higher in London.

Government sources pointed to the example of Bob Crow, the RMT union leader, to highlight the way in which a few people on high salaries benefit from subsidised accommodation. Crow, whose package is around £140,000 a year, lives in social housing in London.

Maria Eagle, the Labour shadow cabinet minister, accused Shapps of "trying to hide the fact that he had presided over a 99% fall in the past six months in new housing [construction] starts".

"I think the issue about affordable housing is that there isn't enough of it," she told the BBC. "Yes, you have to crack down on abuse. What we really need to see is more social housing being built – that's what Grant Shapps isn't doing."

The Department for Communities and Local Government said: "Ministers have been clear of their commitment to tackle tenancy fraud, which costs this country billions of pounds and means people who could otherwise be housed are losing out. That's why in addition to a national crackdown, which has been backed with £19m government cash, we will shortly publish proposals for consultation to criminalise tenancy fraud."