Before I start I should say that I don't really agree with this explanation, but then I'm not a lawyer so there may be more legal sense to it after all. Anyway: the Human Rights issues come in because inevitably there are some people who will be hit hard enough by this cut in HB that they have to move out, either through their own choice or because of eviction. But then of course this requires that there be somewhere else for them to move to, which isn't always the case as we have a shortage of "small" houses.
This is where the issue lies, then: a government law can, and will, lead to some people having to move out of where they live. This could be seen as violation of Protocol 1, Article 1 of the ECHR, "right to possessions". By contrast there is no Human Right to "not have tax money squandered on ... spongers".
On the other hand, since Housing Benefit is given to people to help them pay rent, do they really 'possess' the house they live in? That's my somewhat naive argument against the point I've made above. At the moment the HB under-occupancy reduction hasn't been tested in a Human Rights court. More serious challenges relate to what constitutes a bedroom -- a First-Tier Tribunal decision in Scotland recently ruled that a bedroom under a certain size cannot be called a bedroom. See here for the legal issues, but note that the page could be out-of-date, depending on whether or not the above decision is overturned at a higher level.
http://www.housing.org.uk/policy/policy-news/social-housing-size-criteria-and-statutory-overcrowding