A government scheme that requires landlords to check the immigration status of tenants has been ruled incompatible with human rights law.

A judge said the Right to Rent policy caused landlords to discriminate against ethnic minorities and foreign nationals who had the legal right to rent in the UK.

Rights groups celebrated the victory, which is a key element of the government’s “hostile environment” – policies that aim to make life difficult for undocumented migrants and encourage them to leave the UK.

“What this shows is the warnings that everyone made about the hostile environment causing racism have been born out,” Chai Patel, legal policy director of the Joint Council for the Welfare of Immigrants, which brought the case to court, told Sky News.

He said the High Court had recognised evidence that the policy made landlords reluctant to rent to anyone without a British passport, particularly ethnic minorities and people from overseas – regardless of whether they had the legal right to rent.

“People who have been affected may not know they’ve been affected,” said Mr Patel.

“But they might have been forced to search for weeks longer for a home, or may even have been made homeless. This kind of structural discrimination has a really damaging effect.”

The scheme was rolled out in England in 2016 but has not yet been introduced in Scotland, Wales or Northern Ireland.

It prevents non-EEA nationals from starting a tenancy if they do not have leave to remain in the UK and the Home Office has not granted them permission to rent.

Research by the Residential Landlords Association, which helped bring the case to court, said 44% of landlords were less likely to rent to people without a British passport as a result of the scheme.

Mr Patel said the ruling should be a “wake up call” on other hostile environment policies, which have seen immigration checks happen in schools, hospitals and workplaces.

The government said it was “disappointed” in the ruling and noted it had been granted permission to appeal.

It argues that the scheme is designed to deter people from staying in the UK when they have no right to do so, and said the law, and guidance for the scheme’s proper application, states that discrimination on grounds of race is not allowed.

“We are disappointed with the judgment and we have been granted permission to appeal, which reflects the important points of law that were considered in the case,” a spokesperson said.

“In the meantime, we are giving careful consideration to the judge’s comments.”

Mr Justice Spencer said Right to Rent was incompatible with the right to freedom from discrimination, enshrined in the European Convention on Human Rights (ECHR), and had “little to no effect” on controlling immigration.

He said it did “not merely provide the occasion or opportunity for private landlords to discriminate but causes them to do so where otherwise they would not”.

He said he thought MPs who had voted for the legislation would be “aghast to learn of its discriminatory effect”.

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