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The Ministry of Defence says it is pausing its plans to change the allocation of military housing after strong criticism from Army families.
Under the plan, serving personnel would have got subsidised housing based on their need, such as how many children they have, rather than their rank.
But there had been significant opposition to the move from officers, with a number threatening to quit.
The defence minister said the MoD U-turn came after listening to feedback.
Andrew Murrison said elements of the New Accommodation Model, which is due to be launched in March, would be paused and a review would be conducted.
If the policy was implemented, it would have meant those with larger families getting larger houses, regardless of seniority.
The move had prompted fears the crisis in army recruitment and retention could get worse.
The BBC obtained testimony from dozens of officers and their partners saying they would quit if they were forced into smaller living quarters.
One said the move would drive out quality officers and tear the heart out of the organisation.
Another said: “[I] Signed off before Christmas and changes to service family accommodation was one of the factors that influenced us as a childless couple”.
A number of military families who would benefit had expressed support for the scheme. But it has been divisive enough for the MoD to think again.
The defence ministry said it was still committed to widening the entitlement and upgrading military accommodation. But for now it is clearly not prepared to pick a fight with so many military families – with the armed forces already struggling with retention and recruitment.
Before the MoD announcement on Monday, more than 300 officers took part in a poll on social media and 78% said they would be prepared to leave if their accommodation entitlement is reduced.
Under the proposals, a married major with no children would have been entitled to a two-bedroom property instead of a three- or four-bedroom house – leaving them with around 38% less space.
A married private with three children would get a larger house – gaining around 27% more space.
Many officers and their families saw the plans as the removal of one of the last remaining perks to deal with the unpredictability of service life – which sees many posted to different locations every few years.
One lieutenant colonel told the BBC: “Based on the new accommodation model, we have decided that remaining in service is no longer a tenable situation for us.”
Another lieutenant colonel said: “I have started to consider leaving since the announcement of this policy. It’s the removal of another perk, and the pros no longer outweigh the cons.”
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