It has emerged that half of all private landlords turn away tenants on the handout.
They use the phrase ‘No DSS’ on their adverts, after the old name for the Government ministry that supervises it payment.
The prejudice makes the search for somewhere to live even harder for the 889,000 struggling families who receive it.
Housing minister Heather Wheeler told The Sun: “Everyone should have the same opportunity when looking for a home, regardless of whether they are in receipt of benefits.
“I will be meeting key stakeholders to tackle “No DSS” advertisements.
EXTRA £19.5M TO COUNCILS
If the sector is unwilling to take action, the Government will then explore all options to remove this practice.”
Homeless charity Shelter, who have campaigned for clampdown on the injustice, welcomed the victory.
Polly Neate, chief executive of Shelter, said: “I hope this announcement will send a powerful message to those letting agents, lenders and landlords who still think discriminatory bans are acceptable.
“These outdated practices must end.
“We look forward to working with the government to make sure that from now on people are treated fairly on a case by case basis.”
The Ministry of Housing, Communities and Local Government will also today hand over an extra £19.5m to councils to help struggling families rent a home.
The cash is to be spent on paying deposits or putting down the first months’ rent.
One in five of all 4.5 million households who live in private rental accommodation receive housing benefit.
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