A cross-party group of MPs, landlords and immigration lawyers are challenging the Right to Rent immigration policy in the High Court.
The policy, introduced in 2014, has required landlords to ascertain whether potential tenants are in the UK legitimately.
But as a result of Right to Rent people without UK passports have commonly been denied a place to live by landlords.
David Smith, policy director for the Residential Landlords Association (RLA), said: “Landlords will welcome the High Court decision to allow a judicial review of the Right to Rent policy which has put them in the impossible position of acting as untrained Border Police trying to ascertain who does and who does not have the right to be in the country.
“This has created difficulties for many legitimate tenants as landlords are forced to play safe and only rent to those with a UK passport.
“The announcement is an important step towards overturning a policy which the government’s own inspectorate had described as having yet to demonstrate its worth.”
RLA research shows that as a result of the Right to Rent policy, 42% of landlords are now less likely to rent to someone without a British passport for fear of prosecution for getting things wrong.
This makes things particularly difficult for the 17% of UK residents without a passport.