A government U-turn will see housing benefit restored to 18-21-year-olds.
Under plans drawn up by David Cameron and George Osborne jobless under-22s no longer qualified for help with their rental costs.
Charities had warned the move put thousands of young people at risk of homelessness.
Theresa May decided to push ahead with the policy when she became prime minister.
But in a written statement to parliament on Thursday, Work and Pensions Secretary Esther McVey said the government was scrapping the cut.
The announcement today means all 18-21 year olds will be entitled to claim support for housing costs in the new Universal Credit benefit system.
“This government is committed to providing young people with the support they need to get started with their working lives,” she said.
“The change I am announcing today means that young people on benefits will be assured that if they secure a tenancy, they will have support towards their housing costs in the normal way.”
McVey added: “This decision ensures that there are no unintended barriers to young people accessing housing on the basis of their age alone and getting into work.”
The U-turn was announced on the last day of parliament before its Easter recess.