Shelter is running a campaign for people to sign an online petition urging more lenders to lend to buy-to-let landlords who take benefits tenants.
Recently, Nationwide and Lloyds announced that they would allow their landlord borrowers to accept tenants on Local Housing Allowance.
Now Shelter says that other lenders must follow suit.
It says that most will not permit their borrowers to accept people receiving benefits, despite the fact that 40% of all households in the UK get some housing benefit.
Nationwide had banned landlords with benefits tenants from borrowing from its buy-to-let subsidiary, The Mortgage Works. However, it reversed the decision after publicity, and together with Lloyds is the only major buy-to-let lender that explicitly permits borrowers to let to tenants receiving housing benefit, according to Shelter.
Shelter says that lenders who fear they will be at risk, because landlords will not be able to meet their mortgage payments if their tenants fall into arrears, are overstating the problem.
It says that with four in ten tenants receiving housing benefit, only one in ten landlords report arrears.
Shelter also says that it is a difficult policy for lenders to enforce, because tenants who do not receive housing benefit at the start of their tenancy may have to apply for it later. As a result, many landlords will be breaking their mortgage conditions.
Shelter is also campaigning for lenders to change their terms and conditions, criticising them for not allowing landlords to offer longer tenancies.