It's rubbish.
Firstly, it means if you're waiting for a council house in London, and have a job, you will, presumably, be bumped lower than someone, with council housing, somewhere else in the country, who is jobless.
Mmm. Popular.
And yes, I know that realistically, council housing in London is pretty much off the radar for all but the very desperate but, you know, there are still some that fall into that category. Eg. You could be living in an old-style housing-association place, with short lease, and have had children, and your relationship split up, and so on.
Secondly, it's a change of dealing with an effect of our nation's approach to industry. Instead of trying to widen the geography (and implicitly, type) of employment, with subsidies in an ideal world, or public sector jobs being relocated, they're going to privatise the problem.
It's basically what they're left with since they're committed, ideologically, to making the public sector smaller, and thus unable to use that as a stimulus to job creation, or to spreading work beyond the south east.
thirdly, it's window-dressing and distraction, largely from the ideology lying behind the second point. The numbers will be weeny, teeny. though I guess it has the potential of having a "stick" element attached to it at some future date, which will have the potential of being a sneaky benefit cut.