It is not permissible for a man to marry his wife’s daughter because she is his step daughter, after he has consummated the relationship with her mother. The fact that she lives with her father and she doesn’t move with her mother to live with him has no effect on the ruling. This is because the mention of housing in the verse is not a condition of the prohibition, it is mentioned only to show the situation and what was customary in the matter of the stepdaughter. There is no difference of opinion in this.
Dr Abdur Rahman Al Adawi says: There are four women who are forbidden due to inter-marriage, that is, because of a marital relationship. They include:
Firstly, the wives of fathers are forbidden. This is due to the saying of Allah SWA: “And do not marry women your fathers married unless it is a thing of the past surely that was an indecency, hated, and a way of evil (Al nisa; 22)”. Therefore, it is forbidden for a man to marry a woman who is married to his father, or his paternal grandfather, or his maternal grandfather, and so forth, and she is forbidden to him due to the marriage contract.
The second category of women are the wives of ones children. This is due to the saying of Allah SWA: “(Also forbidden to you) are the wives of your sons who are of your loins, (Al nisa:23)”. Therefore it is forbidden for a man to marry a woman who has married his son, or his grandson, or further down, and she is forbidden to him due to the contract which she is bound by.
The third are the mothers of the women and those above them, that is, their grandmothers, great grandmother. Allah SWA says: And the mothers of your women (Surah nisa 23)
The fourth type of women who are forbidden due to intermarriage are the daughters of ones wives, that is, stepdaughters, even if they are not living with the stepfather. A girl is forbidden to the husband of her mother after the mother has married him, as for the mother being forbidden then it is due to a marriage contract with the daughter, as mentioned previously, and this is due to the saying of Allah SWA: and your stepdaughters who are in your care from your wives with whom you have lain, but if you have never lain with them it is no fault in you (Al Nisa 23) meaning those stepdaughters who live with their mother’s husband.
Step daughters have been described as those who live with their mother’s husband and this description is not a condition and has nothing to do with making it forbidden or permissible. The description is there to identify them in most cases, where that the man would take in his wife’s daughter and raise her, and whatever is treated as a matter of common practice, holding on its implied meaning is not allowed.
The evidence for the stepdaughter being forbidden is not determined by the fact that she lives in the same house as her mother’s husband. According to the rest of the ayah, Allah says:( but if you have never lain with them, it is no fault in you). This gives evidence that stepdaughters are only forbidden if the man has consummated the marriage with her mother. If he has not consummated the marriage with her mother, then there is no sin on him if he marries her daughter, and this ruling is not made because of the stepdaughter who lives in the same household, or lives with her father.
Sheikh Ibraheem Jalhoum says:
If the mother has been contracted into marriage, then it is not permissible for him to marry her daughter who she conceived from a previous husband, As Allah SWA says: and your step daughters who are in your care from your wives with whom you have lain, but if you have never lain with them it is no fault in you (Al Nisa 23) . This blessed verse has made the situation clear on the fact that if the man has consummated the marriage with mother, then her daughter is forbidden to him, regardless if she has given him baby or she has not. Once he has consummated with the mother through a legal marriage, then her daughter becomes a daughter to him, and she is forbidden to him permanently.
In this Elevated qur’anic expression (And your stepdaughters who live in your houses), the stepdaughter is the daughter of the wife whose marriage has been consummated, and the verse did not say: ‘the daughters of your women’ to get the attention of the listener, and the feelings of the mother’s husband, that the stepdaughter is now under his care and responsibility and protection, so her mother’s husband should be the one to cater for her and spend on her and raise her. He should treat her like his own daughter from his own blood, completely in the same parenting system.