Redditch MP Jacqui Smith caught up in porn film claims scandal
Mr Cohen said that he had taken full advantage of the arrangement ever since.
"That is exactly what John Moore said on behalf of Mrs Thatcher to her Tory MPs. That makes it part of my salary," he said.
"It really is part of my salary in all but name. That is what it exists for."
Mr Cohen said the Colchester property was his "family home".
He said that there was no reason under the Commons rules why London MPs should not live outside the capital and have a second home in their constituency.
"It is the legitimate costs of having a constituency home to do my job. We don't have a system where people are required to live in their constituency," he said.
"I am doing nothing wrong whatsoever. I am using it for parliamentary purposes. It is a legitimate and proper use of it."
Nevertheless the latest disclosure is likely to fuel demands for a complete overhaul of the system of MPs' expenses and allowances.
Gordon Brown last week tried to head off the growing public anger by asking the Committee on Standards in Public Life to carry out a review of the whole system.
It followed the disclosure that another Greater London MP, Immigration Minister Tony McNulty, was claiming the allowance on the home where his parents live in his Harrow constituency, even though he lived only a few miles away in Hammersmith.
However with the committee not planning to report until after the next general election, the latest row may lead to fresh demands for an immediate crackdown.
