The council revealed in November that Home Office contractor Clearsprings Ready Homes intended to procure eight flats in Buckhurst Hill to accommodate asylum-seeking families.
Cllr Chris Whitbread, leader of Epping Forest wrote an open letter to Prime Minister Kier Starmer and senior ministers urging them to reconsider the plan.
Cllr Whitbread said: “This is excellent news for our community and residents can breathe a sigh of relief.
“I wrote with a sense of disbelief when Clearsprings notified us of their intention to procure eight flats in Buckhurst Hill to accommodate asylum seekers.
“We’re already hosting two Home Office asylum-seeker hotels in the district.”
In his letter to the Prime Minister, Cllr Whitbread argued that the proposals show “crass insensitivity” and are “incomprehensible”.
The Bell Hotel has been at the centre of public protests, disturbances and ongoing demonstrations, creating significant tensions in the community and placing a heavy demand on police resources.
Another asylum hotel, the Phoenix, was partially destroyed in an arson attack earlier this year.
Cllr Whitbread referred to the arrest and conviction of Hadush Kebatu for sexual offences committed during the summer and to his mistaken release from Chelmsford Prison, which exacerbated significant community tensions.
He warned that the housing of additional asylum seekers would further destabilise the community and undermine efforts to restore calm.
He added: “The impact of events over the past six months has been deeply felt across our district and has created significant challenges for community cohesion and public safety.
“Residents have experienced fear and uncertainty, and the strain on local resources has been considerable.
“This withdrawal shows that Clearsprings and the Home Office have listened to us, seen sense and taken the right decision.
“We hope they show similar good sense with regards to the Bell Hotel and move to an early closure.”