Five disabled housing tenants have failed in their bid to have the 'bedroom tax' deemed unlawful in the Court of Appeal.
The court upheld last year's High Court ruling that the Government's spare room subsidy - which reduces housing benefit for those deemed to be under-occupying their council property - is not unlawfully discriminatory.
Lawyers argued regulations introduced in April did not take into account the accommodation requirements of disabled residents.
Claims were also turned out from two lone parents, who had argued the 'bedroom tax' violates human rights laws and common law because of its impact on vulnerable families.
Original challenges to the Government policy came from 10 families in July last year. Since then, five cases involving disabled children are no longer being pursued because these families have come under exemptions.
Responding to the judgement, a Department for Work and Pensions spokesperson said: 'We are pleased that the courts have once again found in our favour and agreed this policy is lawful.
'Reform of housing benefit in the social sector is essential to ensure the long-term sustainability of the benefit. But we have ensured extra discretionary housing support is available for vulnerable people.'
Ugo Hayter from law firm Leigh Day, one of the law firms representing two people in the legal challenge, said: 'We are extremely disappointed by this judgment and we are baffled by the findings of the Court of Appeal.
'The court recognised that our clients and thousands of disabled people across the UK had a need for accommodation not provided for by the new housing benefit rules, however the court decided that disabled tenants should not have their housing needs met on an equivalent basis to their able-bodied counterparts, just because they are disabled.'
