Foster carers and parents of serving armed forces personnel will be exempted from welfare deductions if they have spare rooms, Work and Pensions Secretary Iain Duncan Smith has announced.
Mr Duncan Smith has come under intense pressure over the application of what Labour calls the “bedroom tax”, which will see social home tenants lose housing benefit if they are deemed to have more rooms than they need.
He issued guidance to local authorities today that discretionary payments are available for people whose homes have significant adaptations to help them cope with a disability and for those whose long-term medical conditions create difficulties in sharing a bedroom.
And he said that foster parents will be allowed to have one spare room, whether or not a child has been placed with them, so long as they have fostered a child or been approved to do so within the past 12 months.
Meanwhile, members of the armed forces who are living with their parents will be regarded as still occupying their room while away on operations, removing the threat of housing benefit deductions.
Announcing the concessions in a written statement to the House of Commons, Mr Duncan Smith said: “The intent of the policy was that by using discretionary housing payments, the estimated 5,000 foster carers and rather fewer armed forces personnel groups would be protected.
“We have agreed with local authority organisations improved arrangements through these regulations that puts these protections beyond doubt.”
National Housing Federation chief executive David Orr said today's concessions amounted to "an admission that the bedroom tax is ill-thought through and incompetent".
Mr Orr said: "Exempting armed forces personnel and giving foster carers some protection from the bedroom tax is not enough. The bedroom tax is still an unfair and perverse tax which will hit hundreds of thousands of other vulnerable people living in social housing around the country.
"They are being penalised for a weak housing policy that for years has failed to build enough affordable homes and reduce the housing benefit bill.
"The Department of Work and Pensions' continued claim that discretionary housing payments (DHP) will protect all of the most vulnerable is simply not true. Even if DHP was divided equally only among those receiving disability living allowance, they would receive only £2.51 a week, compared to an average loss of £14 per week. It doesn't add up.
"Today's concession is an admission that the bedroom tax is ill-thought and incompetent. The Government must repeal this ill-conceived policy, but at the very least right now it must exempt disabled and other vulnerable people from these cuts."
But Mr Duncan Smith insisted that the policy remained "absolutely vital" to deal with the problem of what Prime Minister David Cameron calls a "spare room subsidy" for claimants in social housing.
The Work and Pensions Secretary told ITV News: "This policy is absolutely vital. It's required. The last government saw far too many people living in accommodation which they did not fully occupy and in the meantime there were millions of people who suffered because they were on waiting lists or they live in overcrowded accommodation.
"It's a very good policy, the public knows it's a good policy. This is absolutely right. All we need to do here is make sure the guidance is very clear so that local authorities can deal with those exceptional items but the main policy is absolutely straight."
A DWP spokesman said: "It was always our intention that foster carers and armed forces personnel would be covered by Discretionary Housing Payments and therefore not affected.
"We will now adjust the regulations to give greater certainty that these families will retain their entitlement to a spare bedroom."
Shadow work and pensions secretary Liam Byrne said: "David Cameron's bedroom tax has descended into total chaos. Today's announcement doesn't bring forward one extra penny for victims of this wretched tax.
"Today this Government will oppose Labour's plans today for a mansion tax - but they're pressing ahead with a bedroom tax which will hit families with literally nowhere else to go.
"Labour will not rest until ministers think again, admit they have got this wrong and drop this hated tax for good."
Shadow defence secretary Jim Murphy said: "For months head-in-the-sand defence ministers have denied there was a problem, but now they've backtracked. Ministers' incompetence has been shown up in this humiliating move.
"Government embarrassment is matched only by the fact this climb-down does not go far enough to include reservists, whose families could also be hit."