Much of the problem around East and North London is that private landlords are evicting tenants or not renewing leases to cash in on the Olympic letting market. So, the market is overheating/has overheated. There is a lack of housing, and the decades long lack of construction and RTB policies have provided the base that the Olympics have exacerbated. So this may be a short term phenomenon, with East London reverting to being the relatively cheap part of London in which to rent once the Games are over and benefit restrictions bite.
Newham's action is perhaps the natural consequence of benefit restrictions, but I am of the view that taxpayers should never have been rents paid by benefits up to £100k a year. The buy to let market has been funded by the tax payer for too long and serious attempts needed to be made to control it. Of course, the other aspect is the supply side, with the problem being that far too little is being done to address this. The Nimby charter otherwise known as the Localism act is likely to have little beneficial impact in this area.