From the Pension Credit Procedures Guide:
“Premises occupied by relatives
15200 If premises are occupied by close relatives, you can disregard indefinitely the value of any premises they live in, provided the property is lived in as the home by a:
close relative of either the customer or his partner where the relative is;
aged over 60
disabled
former partner of a customer and they are not estranged or divorced, eg when one of a married couple goes into residential care and they are treated as not being members of the same household”
From the Regs you get a different take on it and I would agree with you. However, the Regulations would then be discriminating against customers with partners. This would appear to contravene Article 14 of the Human Rights Act. However, Decision Makers would be following advice in the DMG and the procedures guide first.
Of course someone else may put me right.