Homeless people face being moved outside their local area into rented accommodation rather than being placed on a waiting list for council housing under plans considered by a flagship Tory borough in the capital, according to leaked documents (pdf) obtained by the Guardian.

Hammersmith & Fulham council admitted last week it was in talks, along with Westminster and Kensington & Chelsea, to relocate 500 families on benefits to the Midlands – but said any agreement would not result in a large-scale exodus.

However, Hammersmith & Fulham's new strategy makes it clear that anyone claiming to be homeless will now be offered accommodation "potentially outside the borough" – a break with past policy which sought to offer the destitute a local home until they were allocated council housing.

This thinking extends to planning policy: more than 10,000 homes will be given planning consent in the borough this year, yet not one will be available to the poor on a social rent, even though mayor Boris Johnson's London plan requires a quarter of new developments to be available to those on low wages.

The authority admits its policy will "end the previously assumed link between a homelessness application and a social housing tenancy".

Welfare cuts mean the trickle of homelessness claims in the capital will soon become a flood. An analysis by Cambridge University for Shelter showed that 40% of Hammersmith neighbourhoods were affordable on benefits in 2011, but this dwindles to 6% in 2016.

Hammersmith's draft housing strategy stops handing out council homes on the basis of need. Preference will be given to those who can prove they have a five-year long "local connection" and are in work or volunteering.

The council wants to prioritise "wealth creators" rather than the impoverished in its housing strategy. It claims it already has too many poor people living on social rents in the borough.

Hammersmith, which is influential with Downing Street, argues that 70% of tenants in social housing are "workless and dependent on benefits ... [and] not making a contribution that could help drive economic growth".

Charities warn that Hammersmith's strategy will have a significant impact on the homeless, poor and vulnerable.

Duncan Shrubsole, director of policy at homeless charity Crisis, said: "This will potentially lead to a postcode lottery and the ending of the national housing safety net built up since the second world war."

The authority, which has a waiting list of 10,000 families for council homes, is pushing "affordable" rental schemes – aimed at people earning about £50,000.

Such a policy means of the 6,700 new properties in the redevelopment of the Earl's Court exhibition centre, not one will be affordable to anybody on a living wage.

Even worse, say critics, is that key services have been replaced by high-grade housing. In Shepherd's Bush, developers have been allowed to demolish a homeless hostel and day centre to make space for 200 high-rise flats and mews houses. More than 300 council homes have been auctioned off, raising £100m for the council.

The council's radical policies are a result of new powers conferred by the 2011 Localism Act, which gives councils the right to decide who gets social housing and for how long.

New council tenants in west London will only get tenancies of up to five years, ending the idea that a council home is for life. Council tenants under 25 and those with a history of "antisocial and criminal behaviour" will be allowed to stay for just two years.

Andrew Slaughter, Labour MP for Hammersmith, said: "Families are being uprooted and forced to move hundreds of miles away from the community because the Tory party says it cannot afford to keep them. However, this is evidence the Conservatives are destroying affordable homes for ordinary people and refusing to build new ones."

The council said no decisions had been taken yet on the plan. Andrew Johnson, Hammersmith & Fulham council's cabinet member for housing, said: "Our priority is to reward hard-working families. We will continue to house elderly people and others who are vulnerable. We want to give people a hand up and not a handout. We want to incentivise residents to make the most of their lives. Council housing can be a great safety net to help get people back on their feet, but it should be a springboard, not a destination."

"By proposing fixed-term tenancies for new tenants, we intend to remove the notion that a council house is always for life. The current system does not promote personal aspiration or provide tenants with any incentive to try to move into home ownership and does not make the best use of the housing we have."