Harrow Council in north-west London is offering council tenants payments of up to £38,000 to buy their own home on the private market.
Under its Grants to Move scheme it will also pay up to £6,000 for people to move into a private rented home and help pay removal costs.
The council has housing stock of 5,000 homes and 4,000 people on the waiting list, said a spokesman.
A London geography professor called it “state-led gentrification”.
The Conservative authority said its grants for people to move into bought or privately rented accommodation were designed for people already considering moving.
Grants start at £20,000 for people buying homes who are in a one-bedroom council home and go to £38,000 for those leaving a four-bedroom home.
For people moving to private rented accommodation, grants start at £1,500 to those leaving a one-bedroom home and go up to £6,000 if a four-bedroom home is being vacated.
A payment of up to £4,500 for people willing to move to a smaller council or housing association property has been available for a few years.
‘Dearth of properties’
Barry Macleod-Cullinane, Harrow Council Cabinet Member for Adults and Housing, said: “Housing families in temporary accommodation costs Harrow Council around £3m a year.
Doing nothing is not an option.
We will treat each application on a case-by-case basis and there will be checks and balances in place to prevent fraud.”
The council said grants could not be used to buy council property and part of the grant would be reclaimed if people moved out of their newly purchased homes within five years.
Since the offer became available at the end of September, a family of four has opted to buy a property in the Midlands and two women living alone in two-bedroom flats were paid £3,000 each to move into private rentals.
Bob Blackman, Conservative MP for Harrow East said Harrow had a “dearth” of properties available and it was a good idea to attempt to encourage those who wish to move on to do so.
But Professor Loretta Lees from King’s College London’s geography department said: “This feeds into state-led gentrification and social cleansing in London.
“Rather than building more social housing and social rented homes they just shift populations out and use this as moral propaganda that they are doing something about the massive wait lists for social housing, when they are not.”
In April the authority said it was considering offering up to £20,000 to those wishing to leave council property to move abroad because it has one of the smallest stocks of social housing in the capital.
Source: BBC News London