The consultation, published in July last year, proposed handing local authorities new powers to determine applications for stopping-up notices.
The consultation said that London boroughs already have this power and that the proposal would bring all authorities in line with those in the capital.
The consultation document said that councils are "better placed to determine the merits of a stopping-up application that relates to local development" and added that the move would "reduce the number of parties involved, reduce bureaucracy and allow further simplification and acceleration of the process".
But in a statement yesterday, Hammond said: "The government has decided not to devolve the stopping up and diversion order process to a local level.
"Consultation responses suggested that any devolution should be accompanied by a charging regime; additional costs and charges would be borne by both local authorities and those making applications, with no guarantee of a simpler or faster process."
The consultation response also reveals that the government has ruled out a statutory time limit for negotiating objections to stopping-up notices and diversion orders.
It says that the application process for stopping-up and diversion orders has been "improved significantly" since Adrian Penfold published his review of non-planning consents in 2010, which recommended changes to the application process for such orders.
The consultation response said that legislation as part of the Growth and Infrastructure Bill, currently before Parliament, would allow stopping up and diversion applications to be made alongside planning applications.
Ghislaine Trehearne, senior policy officer at property industry lobby group the British Property Federation, said: "We believe allowing local authorities to determine a stopping up order at the same time they deal with the relevant planning application makes good sense and very much fits with the government’s ambition to cut red tape and speed up development.
"While it’s disappointing this will not be the case, it is encouraging that some of the development risk and cause of delay has been stripped back. Previously applications for a stopping up order would not be processed by the DfT until planning permission had been granted by the local authority. At least applications can now be made alongside planning applications."
Meanwhile, the Department for Communities and Local Government has published new guidance on the pre-application process for nationally significant infrastructure projects.
It sets out the requirements and procedures for the pre-application process and consultation where an application is to be made for consent for a major infrastructure project under the 2008 Planning Act.
Government Response: Stopping Up and Diversion Orders: Reform of the Application Process for Local Highways is available here.
Planning Act 2008: Guidance on the pre-application process is available here.