The government will today offer councils a "once in a generation opportunity" to keep the revenue from council houses and reinvest it into building new stock, as it attempts to reform a 50-year-old system of council home construction before the general election.
The housing minister, John Healey, has offered councils greater freedom in how they rebuild their housing stock.
If all councils agree, the voluntary deal can go ahead without any need for legislation, meaning a change to the system whether or not Labour wins the election.
Healey believes the new system, if agreed, could create the funding capacity to build over 10,000 new council homes a year.
The government is offering councils the chance to fund and run their council homes. Although the proposal includes an end to central government subsidy, officials hope to persuade councils to sign up by offering "10%" more money for each of the 177 local authority areas across the UK for maintaining and managing their homes.
Healey is attempting to dismantle the current system of funding council housing, which has seen local council housing stock, depleted from the years of right-to-buy, unable to replenish itself because it sends all revenue back to central government.
Under his new self-financing system, councils will keep all the rent they collect from their homes and all the receipts from any sales of houses or land.
"Not a single penny will go to Whitehall, and not a single penny will subsidise other councils as the current system dictates," Healey said.
"In return, councils will accept a share of an additional £3.65bn debt. No council will take on a level of debt that is not sustainable for the long term.
"This is also a good deal for central government by removing the complex annual round of cross-subsidy decisions, making the funding system clearer and fairer.
"It also devolves from Whitehall the funding, management and standards of council housing in future to elected local councils."
He said the plan would "bring council house funding up to date, replacing a system which was introduced before the second world war".
If the government cannot secure agreement to the change from all councils across the UK, it will be unable to go ahead with a voluntary agreement and will have to resort to legislation, making it harder to imagine the deal going through with – at most – 10 days of parliamentary time left before the election.
