Survivors of domestic abuse will be able to continue to pay for places in women’s refuges through the welfare system, after the government ditched plans to overhaul funding for the life-saving accommodation.

The government announced plans last year to remove refuges and other forms of short-term supported housing from the welfare system.

The changes would have meant women fleeing abusive partners would not have been able to pay for the accommodation using housing benefit, the last guaranteed source of income available to refuges. On average, housing benefit makes up 53% of refuge funding.

But after concerted pressure from women’s rights campaigners and coverage of the proposals in the Guardian, the Ministry of Housing, Communities and Local Government said on Thursday that all supported housing funding would be retained in the welfare system.

Katie Ghose, the chief executive of Women’s Aid, said: “Women’s Aid is delighted the government has listened and acted to keep refuge doors open for survivors of domestic abuse. Rent in refuges will continue to be funded through housing benefit. This will be warmly welcomed by survivors and our member services – housing benefit makes up, on average, around half of a refuge’s income.”

An average of two women a week are killed by a partner or former partner in England and Wales. Ghose said refuges provided “a real lifeline for thousands of women and children experiencing abuse at home”.

She said Women’s Aid would now work with the government to develop a system of national oversight for life-saving refuges.

The charity Refuge said the proposals could have led to the collapse of provision of accommodation for women fleeing violent partners.

Its chief executive, Sandra Horley, said: “Housing benefit is an essential source of income for women’s refuges. Previous proposals would have devolved this critical funding to local authorities, which have no obligation to fund refuges. This could have led to the collapse of refuge provision across the country; a national travesty. Thankfully this disaster has been averted.”

Horley urged the government to increase financial support for refuges to meet an “ever-growing” demand.

Under the government’s revised plans, housing benefit will be kept in place for all those living in supported accommodation, believed to number around 716,000 people in 651,500 properties in Britain.

Around £4.12bn a year is spent on housing benefit payments for supported housing, representing about 17% of total expenditure on the benefit, which is being rolled up in the new universal credit.

The housing minister Kit Malthouse said: “Protection of the most vulnerable has always been our primary concern, and following our consultation the case for keeping supported housing in the welfare system became clear.”

Ministers also announced they would work with providers, local authorities, membership bodies and resident representatives over the coming months to develop an oversight regime for the sector.

The government is introducing a domestic abuse bill, which has recently closed to consultation. It is heavily focused on criminal justice measures and includes proposed powers to ban suspects from contacting alleged victims or from drinking alcohol or taking drugs. There are also plans to electronically tag suspects as part of a new civil protection order.

The shadow housing minister, Sarah Jones, said: “Thousands spoke out against the ill-conceived proposals for supported housing funding which would have left some of our most vulnerable people without a safe place to stay.

“But it begs the question why ministers put people through this pain and uncertainty in the first place. Three wasted years have strained our supported housing stock at a time when the need is higher than ever, a result of austerity and the disastrous roll out of Universal Credit.

“The government must now urgently guarantee housing benefit funding and increase the provision of supported housing. Only this sort of decisive action could begin to make up for the delays and damage that has been inflicted on providers and people living in supported housing.”