The Local Government has responded to an Audit Commission report in which 145 chief finance officers were surveyed during October and November on the effect of the problems in their communities.
The findings are included in a report: "Crunch Time? The impact of the economic downturn on local government finances".
There are fears a recession and rising unemployment will cause a wave of social problems including rising homelessness, more family breakdowns, increased drug-taking and more alcohol abuse.
The key findings were:
Two thirds of councils reportied an increase in applications for housing and other benefits
One in five councils has already cut services, or plans service cuts
A quarter of England's councils have seen increased demand for elderly care
One in 10 councils are experiencing increased demand for state school places - often as parents pull their children out of private schools they can no longer afford
A small number of councils say they are not sure they can withstand the cost pressures they face.
Responding to the report, Chairman of the Local Government Association Margaret Eaton, said: “These figures demonstrate the effects the credit crunch and the recession are having on councils across the country.
“Global problems have tipped the British economy into a recession that is affecting countries around the world. The Government has acted at international and national levels, councils are now taking a lead in the effort to find local solutions to local problems.
“From keeping people in their own homes and offering support to the unemployed, to helping small businesses stay afloat, councils are already acting.
"Councils will be pulling out all the stops over the coming months and years to protect local people and businesses from the worst effects of the slump."