Local government leaders claim some "rip-off" agencies in England and Wales are charging non-refundable administration costs in excess of £500.
Letting agents are fuelling the housing crisis by hitting tenants with extortionate fees, MPs are set to be told.
They will tell the Communities and Local Government select committee that more powers are needed to protect tenants from unscrupulous agents, as well as rogue landlords, as more people are forced to turn to the private rented sector.
Town halls claim that high letting fees in some areas are acting as a barrier to people trying to find a home. Some local authorities have set up their own letting agencies to ensure tenants get a fair deal, the Local Government Association said.
Cllr Tony Newman, from the LGA's environment and housing board, said: "With the housing market stagnant and a shortage of mortgages available to help first-time buyers, people are increasingly turning to the private rented sector to find a home. Now, more than ever, we need safeguards in place to help people find good rental properties and protect those who rent from bad landlords and rip-off letting agents.
"For many people looking to rent, especially the younger generation moving out from their family home, the up-front costs of a deposit and agency fees can be huge. We've heard stories of some letting agents charging hundreds of pounds just to carry out basic credit and reference checks. For people in the early stages of their career and on relatively low incomes, this can prove a stretch too far.
"The vast majority of private sector landlords provide good housing and a fair deal for their tenants but there are some bad landlords out there which give the rest of the sector a bad name by renting out shabby, substandard homes. We need Government to strip away some of the needless bureaucracy which makes it more difficult for councils to help protect those tenants who are being ripped off and forced to live in substandard housing."
The LGA pointed to housing survey research that found more than 3.6 million private rented households were recorded in England last year, up more than one million in six years.
Housing Minister Mark Prisk said: "People living in private rented homes should be treated fairly and honestly, but we want to avoid excessive red tape that would push up the cost of rents and reduce choice for tenants. That's why we have strongly backed industry-led schemes such SafeAgent, which allows landlords and tenants to identify trusted agents, and to vote with their feet when looking to let or rent a property.
"Letting agents are already subject to consumer protection legislation, and any tenants who have suffered from poor practice should report the problem to their local trading standards officer or the Office of Fair Trading."