A Government U-turn on welfare will mean 18 to 21-year-olds are automatically entitled to claim housing benefit again.
Work and Pensions Secretary Esther McVey said the change "will reassure all young people that housing support is in place if they need it".
Around 10,000 young people would have been hit by the policy to end automatic entitlement for the housing element of Universal Credit, which was announced by David Cameron and George Osborne in 2014.
It was introduced in April 2017 and came with a series of exemptions, with parents, carers and those who could not live with their parents still able to claim.
Figures published in January showed in the first three months of the policy, just 90 people had claims turned down - some 4% of 2,090 that applied.
Ms McVey (pictured) said: "We want every young person to have the confidence to strive to fulfil their ambitions.
"For those young people who are vulnerable or face extra barriers, Universal Credit provides them with intensive, personalised support to move into employment, training or work experience; so no young person is left behind as they could be under the old benefits system.
"As we roll out Universal Credit, we have always been clear we will make any necessary changes along the way. This announcement today will reassure all young people that housing support is in place if they need it."
The announcement means all 18 to 21-year-olds will be entitled to claim support for housing costs in the new Universal Credit benefit system.
The changes were intended to save the Government around £95 million by the end of 2020.
Those 18 to 21-year-olds claiming Universal Credit will have a youth obligation, a package of support aimed at helping those looking to get into work.
Charities had warned the reform could lead to rising homelessness and welcomed the Government's change of heart.
Greg Beales, Shelter's campaign director, said: "The withdrawal of housing benefit for 18 to 21s put young people at real risk of homelessness, and at Shelter we have seen young people in desperate situations, with no family to turn to for support.
"With soaring rents and a lack of social housing, this has left many facing homelessness.
"Alongside not having somewhere secure to call home, this can prevent them from finding a job, maintaining relationships and living a full and decent life.
"Many just need the helping hand that housing benefit can provide, so we're thrilled at the decision to provide support to all 18 to 21s if they need it."
Seyi Obakin, chief executive of Centrepoint, said: "The Secretary of State's decision to reinstate the automatic eligibility of 18 to 21-year-olds to claim Universal Credit for their housing costs is recognition of a policy that risked leaving very vulnerable young people with nowhere to live.
"It was obvious from the first time the policy was floated in 2013 that at best it would be unworkable, and at worst it could actually increase homelessness and reduce the willingness of landlords to rent to all young people.
"Whilst the system of exemptions which Centrepoint and others fought for have smoothed the rougher edges of the policy, today's welcome announcement will put the minds of young people and their prospective landlords at ease."
St Basils chief executive Jean Templeton said: "We welcome this decision to reinstate housing cost entitlement for 18 to 21-year-olds.
"This means no young person will need to disclose vulnerability in order to find somewhere to live.
"We hope this decision will increase landlord confidence in offering accommodation to younger people, knowing they can access assistance with their rent if needed."
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