It had been feared almost 3,000 households in Sheffield would be affected by new national legislation to make households with a joint income of over £31,000 ‘Pay to Stay’ in council properties.
The move would have hit those in work - with people on benefits worth the same amount automatically excluded from any rise.
But after the Government announced a partial climbdown on the policy in November, giving councils the choice whether they wish to implement it, Sheffield Council has rejected the plan.
A Sheffield Council welfare reform report said: “The government has made Pay to Stay discretionary, under which local authority tenants with taxable incomes over £31,000 (or £40,000 in London) would have been required to pay a market, or near market, rent.
“The decision has been made in Sheffield not to implement this.”
Gavin Barwell, Conservative housing minister, said last month while the Government wants to ensure that social housing is occupied by ‘those who need it most’, it needs ‘to do so in a way that supports those ordinary working-class families who can struggle to get by’.
The Local Government Association said the average affected households would have seen rents rise by £1,065 per year, with the news the policy will not be mandatory being ‘a huge relief to households across the country’.
But the same Sheffield Council report has warned hundreds of out-of-work families are to be hit with benefit cuts of up to £6,000 per year from January.
It is estimated around 800 extra Sheffield households will join the current 113 families that have been affected by a reduction in the maximum amount of benefits available to them.
The number of affected households contain over 3,400 children.
The benefit cap was introduced in Sheffield in August 2013 and limited the amount of income an out-of-work family, including single parents, could receive in certain benefits, including housing benefit.
At that stage, the cap was set at £26,000 for couples and £16,800 for single parents. From January, this is going down to £20,000 for families and £13,400 for single people.