What was the reason they gave for turning them down?
I myself would write all my representatives and the governer. Though they may not want the exposure, a newspaper article usually brings results, too. I would think the press would find this an interesting topic, and it's certainly one that needs fixing, so they'd be helping others, too.
I have found that sometimes I really have to go out a limb and make noise to get what I need in this kind of situation. That unmarried people are given what legally married couples cannot get is an outrage. Housing is, after all, one of our Level One basic needs.
They shouldn't give up without a good fight.p Is the stuation with the in-laws such that it may cause emotional problems in parents, or, especially, in the child? If so, this is something to dwell on.