The New Allotment Company is renting 100sq ft allotments for £150 each, treble the price but a third of the size of typical council plots.
Local authorities could give up building new allotments if private allotment companies fulfil the demand of the 150,000-strong waiting list, allotment providers and representatives warned.
National Allotment Gardens Trust chairman Neil Dixon said: "They are trying to use the fact that allotments are in short supply because councils are not providing them.
"I hope the government makes this illegal but it won't. There are excellent councils looking after allotments — they have a legal obligation to provide them. Councils are going to see this and think they don't need to supply allotments any more and people will be faced with paying £150. They will be middle-class allotments."
National Society of Allotment & Leisure Gardeners national secretary Geoff Stokes said: "There are too many ifs and buts. What controls are going to be put on this? You are only benefiting the directors. If this does take off with private companies you will get local authorities saying they don't need to make any provision because that is in private hands."
"Serial entrepreneur" Rudi Schogger, managing director of the private New Allotment Company, which aims to build 10,000 plots by 2012, said local authority allotments are "not viable" as a business model and that if private businesses such as his take over provision for the shortfall in plots, local authorities may stop holding themselves responsible for the service.
Schogger added: "Local authorities are not making money — their business model is not viable. There are not enough allotments because they are badly managed. That's why they are devolving management to allotment societies.
"It is a possibility [new private allotments] might make councils lazy. But I'm not to be held responsible for the public sector. It is up to the taxpayer to demand them or not. It's nanny state stuff — I don't understand how we arrived at the modern system. It's a socialist system without wanting to get into politics. That's why we arrived at the shortages we have."