Tenants on 19 Hackney estates, taking in more than 12,000 homes, are to be asked to ballot on whether they want to transfer out of Hackney's control. In Manchester, 1,500 tenants in Partington - a post-war "overspill" estate in Trafford run by the council - are to be asked to do likewise.
The moves come as the Government's housing White Paper is expected tomorrow to propose the setting up of local housing companies to which council housing may be transferred - a step towards the Government's aim of making local authorities housing "enablers" rather than direct providers. The companies would have a minority of local authority nominees and tenants on the board, but would be firmly in the private sector.
The moves by Hackney and Manchester would put their homes in the voluntary housing association sector, but both approaches allow private finance to be raised for refurbishment.
If tenants agree, the switch of about 14,000 homes by the two authorities would account for nearly 10 per cent of the total moved out of council control since 1989 through "large-scale voluntary transfers" (LSVTs).
Despite the "right to buy" and the Government's antipathy to council housing, nearly 4 million council houses remain after 40 authorities have used LSVTs to transfer 180,000 homes to housing associations. Authorities usually retain nomination rights to the housing, but private sector care - pounds 1bn to date - is used to refurbish the homes.
So far, most transfers have involved small, chiefly southern and usually Conservative- controlled towns, some of which have lost their entire stock. The plans in Hackney and Manchester are the first to involve big, Labour-controlled urban authorities where ideological resistance to the idea has tended to be strongest. Sue Robertshaw, Hackney's housing director, said the policy was initially driven "by lack of cash".
"We assess that we have a pounds 400m improvement bill on our estates, money that needs to be spent in the next five years. The amount of public money we will have available is unlikely to be more than pounds 100m. Given that, it has become crucial to lever in private sector money."
Councillors now argue that the schemes have "tremendous potential to improve housing conditions for residents".
In Manchester, Claire Nangle, chair of housing, said Partington residents had raised the possibility after the council three years ago spelled out the cash it had for estate regeneration and where it intended to spend it. Partington, less run down than other Manchester estates, was not a priority.
The council will help the tenants with their October ballot.