Five disabled tenants are asking the Court of Appeal to declare the Government's so-called "bedroom tax" regulations unlawful.
The regulations, introduced in April last year, have led to reductions in housing benefit payments to tenants in social housing assessed through controversial "size criteria" to be under-occupying their accommodation.
Campaigners say the regulations have had a "devastating" impact on many people.
Backed by the Equality and Human Rights Commission, lawyers for the five are arguing in test cases of national importance that the regulations have disproportionately discriminated against the disabled.
Martin Westgate QC told three appeal judges today the regulations were imposing an "excessive and unfair burden" and failing to reflect the actual needs for accommodation of disabled people.
The appeal, expected to last three days, is against a High Court decision in July last year upholding the legality of the new regulations.
Mr Westgate accused the High Court judges of allowing themselves to be deflected from properly considering the key issues in the case, taking "too deferential" an approach and failing to scrutinise the Government regulations properly.
He said: "If the High Court had applied the correct approach it would have been bound to have found the discrimination in these cases was disproportionate and imposed an excessive and unfair burden on a vulnerable class of tenants."
The Department for Work and Pensions (DWP) rejects the ''bedroom tax'' tag and says the reality is that ''a spare room subsidy'' has been removed from social sector tenants.
It says local councils are being given discretionary housing payment funding so that they can help vulnerable residents with all the welfare housing reforms, including disabled people affected by the removal of the spare-room subsidy.
Mr Westgate argued today the discretionary payments system created uncertainty, there was evidence from local councils that the amount set aside for payments was inadequate and the scheme was not a reasonable response.
He told Lord Dyson, Master of the Rolls, sitting with Lord Justice Longmore and Lord Justice Ryder, the scheme of discretionary payments was not appropriate to replace "what would otherwise be a long-term benefit to which someone qualifies as of right".
Under the new size criteria, tenants with one spare bedroom have had a payment reduction of 14% and those deemed to have two or more spare a reduction of 25%.
Charities, social landlords and advice agencies have all condemned the system for the devastating harm they say it has caused to many.
But the DWP says reduction of rising housing benefit expenditure is lawful and a legitimate and ''integral aspect'' of the Government's deficit reduction programme. The change in regulations is expected to produce savings of £500m a year.
A DWP spokeswoman said: "We remain confident that we have fulfilled our equality duties to disabled people with the policy.
"Reform of housing benefit in the social sector is essential, so the taxpayer does not pay for people's extra bedrooms.
"But we have given councils £190m of extra funding this year to help those who need it."
Ugo Hayter, a lawyer from Leigh Day, which is one of the law firms bringing the appeal, said: ''We are very confident that the Court of Appeal will see that the decision to implement this legislation by the Government was clearly discriminatory and will overturn last year's ruling by the High Court.
"It is a cruel and deeply disturbing benefit cut which hits the most vulnerable in society."
Anne McMurdie, from Public Law Solicitors, said: "This case is about fairness. It is about disabled people being paid housing benefit to meet the size and type of accommodation they need because of their disabilities and not being financially penalised because they are disabled."
She added: "Since the benefit change was implemented in April 2013 there has been a wealth of research and analysis making clear the serious adverse impact on disabled people."
Among the test cases is that of Charlotte Carmichael, from Southport, Merseyside, who says she is unable to share a bedroom with her husband, Jayson.
Other bedroom challenges awaiting the outcome of today's hearing include those launched by separated parents, who say they need room for children when they come to stay, and victims of domestic violence rehoused with special security.
Since the High Court hearing, disabled children have been given exemption to the "bedroom tax".
The death of grandmother Stephanie Bottrill has been blamed on the tax. The Sunday People reported that the 53-year-old threw herself into the path of a speeding lorry after having to find an additional £80 a month in "tax" when her two children both left home.
The newspaper reported that she left a suicide note to her son, Steven, 23, saying: "Don't blame yourself for me ending my life. The only people to blame are the Government."
Later Mr Bottrill said he had discovered that she should have been exempted under the regulations as a long-standing tenant.
The hearing continues tomorrow.