IME Councils regulally use "inducements" of one kind or another to persuade tenants whose property is underoccupied to trade down--- usually offering a lump sum + moving & re-decoration costs.
The most frequent up-takers of this offer tend to be elderly people moving from 3-bed properties into warden-assisted accommodation.
Similar inducements can be offered to home-owners whose property is underoccupied & often, in poor repair.(in that case the Council will buy & repair the property themselves & bring it into their own stock.)
Councils, however, cannot FORCE anyone out of their home , provided that the tenancy agreement is adhered to.
My mother traded down because, like chy, she believed in the concept of social housing & gave up her 3-bed property to free it up for the use of a family & refused her right-to-buy for the same reasons.
Chy is correct in that Councils have a legal duty to use public money wisely. In fact, it is part of the oath that elected Councillors must "utter" before they can participate in Council business. This duty actually means that Councillors can be sued AS INDIVIDUALS should they be negligent in carrying out that duty. ( VERY rare occurence, though).
More frequently, the COUNCIL as a whole can be challenged , but this would usually be handled by the Ombudsman & out-of-Court settlements achieved.