The new offence will be committed where a person in a residential building as a trespasser, having entered it as a trespasser, knows or ought to know that he or she is trespassing and is living in the building or intends to live there for any period.
The change comes following a consultation which took place over the summer.
However the new offence will not criminalise squatting in commercial and other non-residential buildings as "there does not appear to be the same level of concern" about the issue, the Government said in its response to the consultation (46-page / 108KB PDF). Existing criminal and civil procedures will be available to owners of affected properties, it said.
Squatting is a form of trespass which involves occupying land without the consent of the owner.
Although trespass is not in itself a criminal offence, there are already a range of mechanisms in place to deal with criminal activities which occur due to the actions of squatters, such as damage to private property. However, where criminal sanctions do exist, the police are often reluctant to get involved. As a result, owners and occupiers of property usually end up pursuing civil procedures to have squatters evicted.
Property law expert Stuart Wortley of Pinsent Masons, the law firm behind Out-Law.com said that while owners of land and buildings can currently recover possession from squatters through the civil courts within a few days, navigating the process required access to expensive legal advice.
"Given that relatively few homeowners and residential landlords have both the resources and access to the requisite expertise, the Government's proposals are to be welcomed," he said.
"Although limited to residential property, providing the police with powers of arrest for a new criminal offence of squatting would give a very effective means of recovering possession for all owners of residential property from squatters. Further thought should be given to extending the offence to all property," he said.
In his response to the consultation, Justice Secretary Crispin Blunt said stopping short of criminalising squatting in non-residential buildings was a "balanced compromise".
"Squatters who occupy genuinely abandoned or dilapidated non-residential buildings will not be committing the new offence. Neither will students who occupy academic buildings or workers who stage sit-ins to protest against an employer be caught by the offence. But the offence will provide greater protection in circumstances where the harm caused is the greatest," he said.
The Government plans to make the changes by amending its Legal Aid, Sentencing and Punishment of Offenders Bill, which is currently going through its Report stage in the House of Commons.
The Bill should reach the statute book in the spring with its provisions brought into force shortly after.