Multiple families have been found living in three underground rooms without any natural light or proper ventilation.
Officers from Redbridge Council made the shocking discovery at a property in the Seven Kings area on Wednesday and have since shut the premises and served notice to the landlord.
They say they are still investigating a further 70 addresses in the area.
The London Fire Brigade has also served its own prohibition notices as the property had no means of escape in case of a fire.
The council raided the property as part of their latest action day in partnership with the police, to clamp down on anti-social behaviour, fly-tipping and issues around licensing and environmental health.
Further details relating to the number of people living at the property, as well as their age, sex and how long they have been living there, are yet to be released.
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