The Office of the Deputy Prime Minister select committee, in a report on the£1.8bn a year Supporting People programme, said the project as a whole had been successful.
It gave local government a new community leadership role in providing or commissioning housing-related support services for the vulnerable. But the costs rose from an estimated£350m-750m in 1998 to£1.8bn in the last financial year.
The ODPM commissioned an independent review of the programme less than a year after its launch.
The select committee report says in the long run, housing-related services for vulnerable people may well improve if brought together under the Supporting People umbrella.
'But for the next few years there is a danger that, in an attempt to deal with the elements of the legacy provision, valuable services for the vulnerable may suffer from undue financial constraints, curing the disease but killing the patient.'
The MPs say while they endorse the tighter financial control introduced by the ODPM, real-term cuts in annual provision, applied blindly to each authority, could damage services for vulnerable people.
'It is incumbent on the ODPM to ensure ill-effects are minimised, by targeting reductions in grant on those authorities which the Audit Commission has identified as having excessively high costs, and protecting properly priced and run services for vulnerable people,' the report adds.