A consultation last year had proposed a shift away from housing benefit to a grant-funding model for people in supported housing on a short-term basis, such as domestic violence victims or those facing homelessness.
Under this system councils would have received funding and paid discretionary supported housing rents.
This sparked concerns that a lack of funding certainty could cause some refuges and supported housing schemes to close as many are financially reliant on rental income they receive.
Remaining within housing benefit means people in supported housing will continue to claim as usual, with rent normally paid direct to the landlord.
Announcing the decision, housing minister Kit Malthouse said: “Protection of the most vulnerable has always been our primary concern, and following our consultation, the case for keeping supported housing in the welfare system became clear.”
Justin Tomlinson, minister for family support, housing and child maintenance, added: “We value the expertise of stakeholders and have listened carefully to their concerns during the consultation.
“As a result we will continue to pay housing benefit for all supported housing – making sure safe homes are provided for those that need it most.”
Melanie Rees, head of policy at the Chartered Institute of Housing, said the government had made the right decision.
“This type of housing provides vital support for some of the most vulnerable people in our society – people who have been victims of homelessness or domestic abuse for example – and it is absolutely right that it will continue to be funded by the welfare system.
“Without that certainty there was a real risk that refuges and other supported housing schemes would have been forced to close.”
Katie Ghose, chief executive of Women’s Aid, said she was “delighted” the government had listened to campaigners’ concerns.
“Housing benefit makes up, on average, around half of a refuge’s income.
“Women in refuge will still be entitled to universal credit for assistance with supporting themselves and their families, it is therefore vital that housing benefit continues to work with the wider universal credit system,” she said.
The government also announced that it wanted to work with local authorities, resident representatives and other to develop a robust oversight regime for supported housing to ensure quality and value for money.
