It is estimated that 5,000 people in Wales who are paying a spare room subsidy could - and should - have been exempt.
Under the rule, anyone who has been in their home since before 1996 and has continually claimed housing benefit does not have to pay the subsidy.
A spokesperson for the Department of Work and Pensions say they are looking at the issue carefully and will take any necessary action.
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David and Angela Southwood, from Newport, say they plan to live in a caravan over the border after learning of the decision.