EU citizens are being made homeless and destitute after being turned down for universal credit despite having the legal right to reside in the UK, in what critics are calling the benefit system’s very own “hostile environment”.

Ministers are being urged to review “unfair practices” after law centres and welfare advisers reported a surge in cases in which EU nationals without UK citizenship have ended up in debt or sleeping rough because of incorrect decisions to refuse their application for universal credit that cut off their benefits overnight.

Claimants who challenge the decision typically have to wait up to 40 weeks for an appeal hearing. Welfare advisers say they win their the appeal in almost all cases, resulting in back payments of thousands of pounds.

However, during the wait for an appeal claimants struggle to pay rent as the claim for universal credit automatically ends previous awards, including housing benefit. With zero income, they experience stress, eviction and debt, and rely on family loans and food banks to survive.

Welfare advisers argue that extra complexity introduced into the benefits system to address public and media concerns about so-called “benefit tourism” mean universal credit is now wrongly penalising EU citizens who have earned permanent residence though years of work or family connections.

It is believed potentially thousands of EU citizens have been affected. One law centre said that while it saw just a handful of cases each month last autumn it was now seeing at least three a week. Several others contacted by the Guardian said they had seen a surge in cases as claimants moved onto universal credit from legacy benefits as a result of a change in circumstances, such as moving home.

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“What is happening to our EU citizen clients is little short of scandalous,” said Michael Bates of the Central England Law Centre in Birmingham. “To see people who have lived and worked here for so long being told they don’t qualify for benefit when they so obviously do is a disgrace”.

Janet Coe, assistant director of Merseyside Law Centre, said it had seen a large increase in EU citizens incorrectly refused access to universal credit over the past six months. “I would absolutely say it is a hostile environment,” she said.

Malgosia Pakulska, senior welfare benefits advisor at the East European Resource Centre, said: “In my experience it looks like the default decision for EU nationals [regarding universal credit] is ‘no’. If you are able to argue your rights or you can find an organisation that is willing to help, then the decision is changed in the client’s favour. But this often takes months.”

Single people, often women, and those who are disabled or in low-paid work are disproportionately affected when the Department for Work and Pensions (DWP) refuses universal credit to EU citizens, say welfare advisers. Claimants who lack financial savings or the language skills to pursue the tortuous process of overturning the decision are most likely to end up destitute.

The problem has grown as more EU citizens move onto universal credit from existing benefits, at which point under DWP rules they must show again they are habitually resident in the UK. Some claimants struggle to show evidence that they are eligible because they have not kept employment and benefits paperwork.

Welfare advisers say the DWP makes little effort to access its own records. These often show that the DWP had previously agreed the claimant had a right to reside in order to receive legacy benefits, and in almost all cases the circumstances informing that decision will not have changed.

“We’ve been doing welfare work for over 30 years. We’ve often seen poor decisions, but not this poor,” said Coe. “The more complex the case the less likely the DWP will make a correct decision. It is partly about how they train the staff and what appears to be a lack of will to help and assist.”

Although the welfare system has never been straightforward for EU citizens to navigate, under the old system claimants refused a particular benefit were rarely left penniless. Under universal credit, which rolls six main benefits into one payment, claimants seeking social security support are put in an “all or nothing” situation.

EU officials are said to be aware of the complexity of the rollout of universal credit.

Facebook Twitter Pinterest EU citizens holding up a banner after lobbying MPs to guarantee their post-Brexit rights. Photograph: Stefan Rousseau/PA

Luisa Porritt, deputy leader of Liberal Democrat MEPs, called for an urgent review: “ The government must urgently review these unfair practices. The inhumane, hostile environment created by the Tories is a disgraceful way to treat our friends, family and neighbours.”

The DWP said it was not aware of a rise in tribunal cases involving habitual residence test decisions. Universal credit decision makers were specially trained and mentored in this area. A DWP spokesperson said: “Staff must pass rigorous training before taking these decisions and we expect them to offer a high standard of support to help people with the evidence they need to provide.”

It added: “There’s been no change in the eligibility for universal credit since 2015 and there have been no changes to access to benefits ahead of EU Exit.”

‘How am I not a priority?’

Roxana Adamczyk, 32, from Poland, has spent 13 years in Birmingham working for local firms and studying for a degree. When she applied for universal credit in January she was turned down, on the incorrect basis that she did not have a legal right to reside.

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Adamczyk’s son – whose British father is estranged – had reached school age and she had moved off income support expecting universal credit would provide some support while she set up her own business – which she had been planning with job centre help.

Despite her work record, and her receipt of income support being a clear sign she had the right to reside, the DWP knocked back her application. It said did not believe she was habitually resident in the UK, and her income stopped overnight.

Attempting to rectify the error was a nightmare, said Adamczyk. “They told me they could not speed up the appeal process because I was not a priority. I said: ‘Listen, I have a small son, all my money has stopped and I could lose my house. How am I not a priority?’”

Having previously volunteered with Citizen’s Advice, Adamczyk was not daunted by universal credit’s bureaucratic maze. She made a second application in February, which was again rejected. She took steps towards another appeal, and threatened the DWP with legal action. The DWP granted the second application on review.

She received no income between January and the end of May. She is still appealing the first application.

The process has been stressful, she says: “I was able to take out an overdraft. My landlord was understanding. And my mum flew over from Poland to help,” she said. “Without that we would have been homeless.”