The charity argued that two changes to housing benefit, due to come into force next month, will make large areas off limits to the poor.
It said the restriction of maximum household size to four bedrooms and caps on the amount of housing benefit a household can receive will have a dramatic effect in London in particular and could mean upwards of 20,000 children having to move.
Alison Garnham, chief executive of Child Poverty Action Group, said: "Housing benefit will no longer be the national scheme it is legally meant to be once cuts redesign it as an engine of social segregation.
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