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 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 the 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."
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."