Families with only one spare room should be let off the so-called bedroom tax, a senior Liberal Democrat suggested - warning ministers they "just can't ignore the social consequences" of the policy.
Party president Tim Farron said the change should be seriously considered as part of a review of the move to reduce housing benefit payments from social tenants deemed to have a larger home than they need.
But he signalled that he would not break coalition ranks again if Labour put it to a vote - after backing a previous motion to scrap the policy - and appeared to significantly tone down his criticisms in a speech.
The Opposition signalled that it intended to force the issue again after advance extracts of a speech by Mr Farron were published stating that the Lib Dems "cannot support" the policy because it was causing "huge social problems" and distorting the housing market.
Shadow welfare minister Chris Bryant called that a "shameless and hypocritical attempt to dodge responsibility for their record". Labour is committed to reversing the reform if it wins power in 2015.
Delivering his remarks to the Centre for Social Justice think tank however, Mr Farron only briefly mentioned the policy - warning that it was likely to lead to developers building too many smaller properties.
He backed the principle of seeking to divert funds from the "out of control" housing benefit bill but said it had to be done without causing hardship.
A cross-party Commons committee earlier published a highly-critical assessment of the existing policy which found that d isabled people are suffering "severe financial hardship and distress" as a direct result.
"I'm not saying the principle of trying to make sure people are given housing benefit on the basis of what they need is wrong in principle but you just can't ignore the social consequences, can you?" Mr Farron said as he answered questions after the speech.
"And you also mustn't ignore the potential consequences for our collective mission, which I hope it is, to build more homes. I f it persuades developers or housing associations to either build less or build too much of the wrong thing... then that is wrong.
"It's a case of having benefit rules to make sure the funds go to the right people and you don't cause hardship in the process. That is neither amending or scrapping, is it? It's about recognising that housing benefit needs to pay for need, not to put people into further need.
Mr Farron was among Lib Dems who voted overwhelmingly at the party conference last year for a review of the policy - which is now under way.
In November he joined Labour MPs in voting for it to be abandoned altogether.
He signalled though that he would not do so if Labour puts the issue to the Commons again.
"Very often I'll see a Labour motion and I'll think 'yeah, OK, I kind of agree with the words in that' and then I think going through that lobby involves endorsing hypocrisy so I tend not to do it.
"The one occasion I did it, I did it because our conference had recently voted - me amongst them - to oppose the abolition of the spare room subsidy in its present form. So I don't think I have any intention of playing into Labour's hands."
He went on: "I don't actually sort of wag my finger at the Conservatives or indeed any of my colleagues for the policy and I will restrain myself from saying the Labour Party's failure to build put this Government in a position where they had to take some kind of drastic action because the housing benefit bill had gone absolutely out of control.
"Everybody is at fault and the only way around it is to get off your high horse and try to find a solution so I actually do agree with the re-evaluation. It is right that we look at it.
"I am happy for the amount of public sector money being spent on social housing to be about what it is. I am very disturbed that so much of it goes into benefits and more than half of it into benefits in the private rented sector and so therefore doesn't build a single house by and large.
"So, w ithout causing any hardship at all, I want to look at ways of making sure we save the money or we switch the money so we develop new homes instead."
He said he was attracted by a proposal from the National Housing Federation to hit only the benefits of those deemed to have two or more spare rooms.
"There is a lot in that. We will wait for the review and evaluation but I think is something we should be looking at," he said.
In its report, the House of Commons Work and Pensions Committee found that the change had hit vulnerable people who were not the intended targets of the reform and have little hope of moving to a smaller property,
The committee voted down a proposal from Labour MP Sheila Gilmore to call for the policy to be scrapped, but it did urge ministers to exempt anyone whose home has been adapted to help them with their disability, as well as any household containing a claimant receiving disability benefits at the higher level.
The committee's report also called for the exemption of carers living with disabled people from the cap which limits benefits to £26,000 a year, arguing that it has had an "adverse effect" on parents or adult children caring for a relative in their own home.
It said that it was "particularly unjust" for homeless people to be subjected to the benefits cap, as they have no choice over the temporary accommodation in which they are placed, which may force them over the limit. The committee called for them to be exempted from the cap.