NI Communities Minister Paul Givan has confirmed he is sending the proposal out for public consultation.
Fra McCann MLA welcomed the announcement and said the current scheme is failing many people.
He said: "The present scheme is not fit for purpose, it does not recognise people suffering from domestic violence or anti-social behaviour.
"I would ask people from the broad housing sector, the Housing Executive and the voluntary housing sector to take part in the consultation to develop a housing selection scheme that is robust and fair."
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However, Ulster Unionist MLA Andy Allen said while he fully agrees the Housing Selection Scheme needs to be replaced with a fairer and more transparent system, a commitment to build an appropriate level of housing must be made or any new system will "ultimately fail".
He said: "Instead of addressing this serious issue, the best the Minister could offer was to resort to petty Party Politics by attempting to point fingers over the bedroom tax and blame it on the Ulster Unionist Party`s previous association with the Conservative Party as part of the UCUNF arrangement.
"I would again ask the Minister; can we really penalise individuals who are unable to downsize before the mitigation package ends? It is not their fault that we as a society have failed them by not building enough social housing. Paul Givan would do better spending his time trying to address this issue rather than seeking to score political points."
(CD/LM)
