The former Scotland international scored six goals in 14 appearances for Leeds in a two-and-a-half month loan last season.
But the Whites have brought in Enoch Showunmi and Luciano Becchio this summer and Leeds are quite well off for forwards according to chairman Bates, who said: "We have to look to the future and the future is in youth. Dougie is 35, he's an east London boy with four kids, so he is not going to move his family north for a two-year contract and it would be unfair to ask him to live in a hotel for a year."
Freedman, 35, has not been involved in Palace's opening three matches of the season.