The plans could be as far-reaching for public housing as the Tory right-to-buy policy.
Labour local authorities are co-operating with the transfer because it could bring them a multi-million-pound windfall, which they can invest in building more public housing. It could lead to unsaleable flats in inner-city tower blocks being bought from local authorities by housing associations.
The plans, pioneered by Sir George Young, Minister for Housing until his promotion to the Treasury, fall short of compulsory privatisation of council housing stock which is being demanded by some right-wingers.
Sir George has insisted that the transfers should be carried out only with the agreement of the local authorities. He has succeeded in persuading more right-wing colleagues that the City would only be prepared to put up the money for the transfers if they were assured that the councils, and their tenants, supported it.
Thirty-one Tory councils have transferred 141,678 homes to the private sector. Five Labour-controlled metropolitan councils are carrying out a study to see how it can be applied to urban estates.
Under the plan, which does not require primary legislation, the housing associations raise millions of pounds in the City to buy council estates. Leading building societies and banks, including the Halifax and National Westminster, have invested in the schemes, which, until now, have been in Tory county areas.
Ministers are keen to develop the plans in urban areas. Tenants support the plans because they are given guaranteed limits on rent rises, pegged below the 5 per cent increases that have become the norm as hard-pressed councils seek to make ends meet.
The housing associations have to maintain the properties and carry out the backlog of repairs, which many councils have been unable to afford. Sir George told a conference at the Chartered Institute of Housing in June that large- scale voluntary transfers could mean 'a thorough rethink of a local authority's role'.
A study by five Labour authorities - Camden, Enfield, Middlesbrough, Manchester and Sheffield - is due to report in the autumn. But Sir George made it clear that he wanted the programme for the transfers to be accelerated. The joint study, being carried out by the councils, the Housing Corporation and the Department of Environment, is looking at 10 projects, to see if it can work in the inner cities. 'It would make sense if we encouraged authorities to go for transfer wherever there is a clear government expenditure gain,' Sir George said.
It could apply to a wide range of authorities across the country, including those with relatively high levels of debt on their housing and higher repair bills, he added.
John Prescott, deputy leader of the Labour Party, gave his backing to a similar housing scheme during the leadership election, emphasising that private finance for public housing could overcome the funding problems faced by councils after the spending squeeze of more than a decade.Reuse content