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About 500 adult male migrants will be housed in a barge on the Dorset coast "in the coming months", the government has confirmed.
The plans have been criticised by local groups, refugee charities and Conservative MP Richard Drax who said "every action's being looked at".
Use of the Bibby Stockholm in Portland Port will be "significantly cheaper than hotels", says the Home Office.
The government says it costs more than £6m a day to house migrants in hotels.
The three-storey Bibby Stockholm will be used to house migrants while they are waiting for their asylum claims to be processed.
As well as providing basic and functional accommodation, healthcare and catering - the berthed vessel will have security on board to minimise disruption to local communities, says the Home Office.
The Bibby Stockholm has 222 rooms and has been refurbished since it was criticised as an "oppressive environment" when the Dutch government used it for asylum seekers.
It now has en-suite rooms, a TV and games room and a gym, according to a fact sheet from its owners, Bibby Maritime.
Using the barge to house migrants was condemned as "ministerial cruelty" by Amnesty International which has called for the plans to be abandoned.