The guidance has been issued amid fears that the threat of prosecution has prevented tenants coming forward to help identify people who were there on the night of the blaze but may not yet have been reported as missing.
The official number presumed to have died stands at 80 but Scotland Yard has said it could take until the end of the year or longer to arrive at a final death toll.
Authorities have faced criticism from local residents who say the death toll is too low, with some claiming the true number is being held back for political reasons.
Tottenham MP David Lammy, whose friend, the artist Khadija Saye, died in the fire, has repeatedly questioned the official number of dead as “far, far too low” and said that “failure to provide updates of the true number that died is feeding suspicion of a cover-up”.
The department for communities and local government yesterday said the director of public prosecutions, in consultation with the attorney general, had issued guidance not to prosecute for illegal subletting in Grenfell Tower “given the public interest must be in being able to identify the victims of the fire”.
Attorney general Jeremy Wright QC said: “Every piece of information will help the authorities accurately identify who was in the flats at the time of the fire. I hope this statement provides some much-needed clarity to residents and the local community, and encourages anyone with information to come forward.”
Communities Secretary Sajid Javid said the decision reflected the “absolute priority” of the government to assist those affected by the fire.
Meanwhile, the number of tower blocks that have failed tests on the flammability of their cladding has risen to 181 in 51 local authorities, the government said yesterday.
The number of at-risk buildings has risen regularly since the government ordered a full review of high-rises around the country. All of those tested so far have failed.
Relations between Grenfell residents and the authorities have been strained by suspicions about the death toll and anger about the pace at which people received official assistance and its quality when it did arrive.
After it was claimed on Saturday that at least one resident was still having rent for their burned-out flat deducted from their bank account, Kensington and Chelsea council attempted to mollify concerns by announcing that people forced to leave their homes near the tower would not have to pay rent.
Many residents from Barandon Walk, Testerton Walk and Hurstway have been living in temporary accommodation since the neighbourhood’s boiler, located beneath Grenfell Tower, was destroyed in the fire.
A council spokesman said: “They will not have to pay rent from the date of the fire until the end of January 2018 when we will review the situation. If any resident has had a direct debit or standing order payment for their rent taken, this will be refunded.”
The news was greeted with caution by those living in the area, who have been staying in emergency accommodation.
Joe Delaney, 37, told the Press Association it was welcome news, but said: “Can they confirm that any money that they consider as being paid to residents will not be deducted from any compensation that residents may eventually receive?”
Campaigners yesterday said that people affected by the fire may boycott the public inquiry into the disaster it if it is too narrow in scope.
The inquiry has been charged with looking at how the fire started and how it developed so quickly. But Yvette Williams, one of the organisers of the Justice 4 Grenfell campaign group, said the “systemic issues” also need to be addressed.
“They cannot just look at June 14, when that building became an inferno. They can’t do that,” she told Sky News. “If we don’t get good terms of reference for the public inquiry and we don’t get a wide remit so that those people can take responsibility for what they’ve done, then we won’t participate in it.”