Significant concessions have been made by the Government to its so-called "bedroom tax" which is set to hit more than 600 housing tenants in Gloucester.
Under the changes foster carers and military families would be exempted from controversial plans which will see housing benefit cut for people in social housing with spare bedrooms.
Work and Pensions Secretary Iain Duncan Smith has also made clear that councils can exempt households with severely disabled children.
The Government has already said pensioners would not be affected by the move, and earmarked financial support aimed at offsetting the impact on other vulnerable groups.
The Tory-led Coalition argue the proposals will save money and help deal with a housing shortage by encouraging people to move out of homes that are too big for them.
But critics say the plans are flawed which will unfairly penalise households. Opponents argue the changes do not go far enough, and that the cash help on offer will not cover the shortfall in lost benefit.
An estimated 635 people in Gloucester face losing hundreds of pounds in benefit each year under the measure.
In Cheltenham it is 627, the Cotswolds 546, Gloucester 635, Forest of Dean 392, Stroud 638, and Tewkesbury 467.
Following fierce criticism, Mr Duncan-Smith has sought to 'clarify' the rules around what the Government describe as the "spare room subsidy".
In a written ministerial statement, the Secretary State said: "People who are approved foster carers will be allowed an additional room, whether or not a child has been placed with them or they are between placements, so long as they have fostered a child, or become an approved foster carer in the last 12 months."
It added: "Adult children who are in the armed forces but who continue to live with parents will be treated as continuing to live at home, even when deployed on operations.
"This means that the size criteria rules will not be applied to the room normally occupied by the member of the armed forces if they intend to return home."
But Liam Byrne, Labour's Shadow Work and Pensions Secretary, argued the changes did not go far enough.
He said: "David Cameron's Bedroom Tax has descended into total chaos. The announcement doesn't bring forward one extra penny for victims of this wretched tax.
"Ministers have said nothing today to guarantee disabled children will be protected from his hated bedroom tax."
Shadow Defence Secretary Jim Murphy said: "For months head-in-the-sand defence ministers have denied there was a problem, but now they've backtracked. Ministers' incompetence has been shown up in this humiliating move.
"Government embarrassment is matched only by the fact this climb-down does not go far enough to include reservists, whose families could also be hit."