A controversial deal between Airbnb and one of the most powerful unions in the US has fallen apart following an intense backlash from labor and housing activists across the country.

The home-sharing company had been in advanced negotiations with the Service Employees International Union (SEIU), which represents 2 million US workers, over a deal in which Airbnb would promote unionized housekeepers in its short-term rentals – a move that would have marked the first-ever formal collaboration between a major firm in the “gig economy” and a labor union.

However, discussions fell apart in the face of criticism from other labor unions that represent hotel workers as well as the SEIU’s own members, as the Guardian reported on Monday.

In a statement obtained by the Guardian on Thursday afternoon, SEIU said it does not have an agreement or deal with Airbnb and that it plans to work with Unite Here, a separate union that represents hotel workers and has strongly criticized the potential SEIU-Airbnb partnership.

“Representatives from SEIU and [Unite Here] met and have agreed to find a common approach to protect and expand the stock of affordable housing in all communities across the country and to protect and preserve standards for workers in residential and hotel cleaning while also growing opportunities for these cleaners to improve their lives,” SEIU’s statement said.

Unite Here welcomed SEIU’s decision to back away from a deal with Airbnb. “It is our clear understanding that SEIU will not have a deal with Airbnb to represent housekeeping services,” said Unite Here spokeswoman Annemarie Strassel.

Strassel continued: “[Unite Here] will continue to vigorously oppose any efforts by Airbnb to expand and push for commonsense laws to mitigate the devastating impact this company has had on our communities.”

Under the terms of the proposed deal, Airbnb reportedly would have endorsed a $15-an-hour minimum wage effort backed by the SEIU, directing hosts to use cleaners who were paid the minimum rate and trained and certified in “green home cleaning services”.

Airbnb, which is worth an estimated $25.5bn, has for years attempted to orchestrate similar deals with other unions, according to Unite Here, a separate union that represents hotel workers and has been vocal in its opposition to the potential SEIU partnership.

Peter Ward, president of the New York chapter of Unite Here, has told the Guardian that Airbnb’s CEO, Brian Chesky, first approached the union in May of 2014 with a similar proposal – one that he rejected. Ward said he has also talked to other unions that have had similar conversations with Airbnb.

Unite Here and other critics argue that Airbnb has enabled people to illegally turn their homes into hotels, which removes permanent housing from the market and exacerbates affordable housing shortages in cities.

In San Francisco, where Airbnb is headquartered, community and labor groups unsuccessfully pushed a ballot measure last year that would have created new restrictions on Airbnb users. A local San Francisco chapter of SEIU funded and helped campaign for the anti-Airbnb measure, making news of the potential deal this month all the more surprising to labor activists.

Partnering with a union would have been a PR victory for Airbnb but would have done little to support low-wage workers, according to critics, who argued that the deal would have meant sending unionized labor into illegal hotels.

Asked about the partnership last week, SEIU International’s president, Mary Kay Henry, declined to discuss details. In a move that raised eyebrows among labor activists, SEIU International’s former president Andy Stern, now a consultant, was representing Airbnb in the negotiations with his former employer.

SEIU spokeswoman Sahar Wali declined to comment further.

Airbnb spokesman Christopher Nulty did not respond to requests for comment.

Asked about the potential SEIU deal on Monday, Nulty said in a statement to the Guardian: “We have been engaged in conversations with organizations and community leaders about how to best help working families find solutions to economic inequality, including creating specific ways we could leverage the Airbnb platform to help create quality union jobs that pay a livable wage.”