Tory Iain Duncan Smith's bedroom tax stands on the brink of collapse today after experts exposed a loophole which could trigger an avalanche of expensive appeals.
Thousands of tenants who have claimed housing benefit continously since 1996 are exempt under little-known regulations passed by the last Labour government.
And experts believe all 660,000 households hit by the Con-Dems cruel tax could use the legislation to lodge an appeal.
Housing consultant and anti-bedroom tax campaigner Joe Halewood revealed details of the exemption on Saturday.
Social and council housing tenants have been stripped of up to 25 per cent of their housing benefit since April.
But Mr Halewood pointed out that housing benefit regulations introduced in March 2006 protect tenants who have claimed continously since January 1 1996.
Mr Duncan Smith's Department for Work and Pensions (DWP) "totally missed" the legislation when drawing up the bedroom tax Bill, he wrote.
Mr Halewood told the Star yesterday: "It's clear that councils did not consider this and have been misdirected by the DWP.
"The bedroom tax has got so many unforeseen and uninteded consequences and this is just another one of them.
"If councils haven't considered this aspect, then every decision they have made is deficient and you have an appeal right against that."
A DWP spokesman admitted the discovery could affect one of the government's most unpopular policy.
"We are aware of a potential regulatory issue in relation to pre-1996 social sector housing benefit tenants and the removal of the spare room subsidy," he said.
"We are looking at this carefully and will take any necessary action to clarify our position as soon as possible."
The impact of the legislation was brought to light earlier this month by benefits expert Peter Barker on specialist discussion forum Rightsnet.
He reported that a local authority appeals officer had "in several cases" been ordered by a tribunal to state specifically whether tenants have claimed housing benefit since 1996.
Mr Barker, whose has worked in benefits since 1985, wrote: "This could be excellent news for a significant number of bedroom tax cases."
A letter sent by Exeter City Council to a tenant on December 17, which shows it upheld a bedroom tax appeal based on the 2006 legislation, was included in Mr Halewood's blog post.
The precedent could spark a wave of appeals that would be expensive for councils to contest and has the potential to bring down the bedroom tax.
Mr Duncan Smith's latest policy debacle comes after his workfare scheme was judged to be legally flawed and universal credit was found to be years behind schedule.
That prompted PCS general secretary Mark Serwotka to ask "how is he still in a job?"
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