The scheme would earmark 499 housing units (about 4% of the total stock) that would be leased on 125 year leases to the LDV, which would probably be a charitable company limited by guarantee. Over 30 years this could generate up to £45 million pounds, which would be reinvested in refurbishing council housing stock to that it will comply with the Decent Homes Standard.

Currently about half of the council’s stock fails to meet the standard, which technically has to be reached by 2010. In 2006 the local authority proposed a stock transfer of the entire social housing portfolio to a housing association, which would have been able to fund the refurbishment using central government funds but this was overwhelmingly rejected by the tenants.

Consequently the local authority has had to consider other ways to raise funds but is limited by the fact that councils cannot borrow on the open market to finance refurbishment.

The new company would either be able to borrow funds or possibly attract a private sector partner and its charitable status would protect it from VAT payments on the refurbishment work and company tax on any surplus. It would also be able to retain 100% of the rental income whereas a large percentage is currently passed on to central government.

These new proposals do not involve a housing association or the transfer of the freehold of the properties out of council ownership and only properties that are currently on short-hold tenancies or unoccupied would be included.

Although the leases awarded to the new company would be for 125 years the initial model proposes a 30 year break clause which would allow the local authority to exercise its right to withdraw the leases.

Just over 100 properties scattered throughout the city have already been identified as suitable for the scheme.

The city council will now work up a fully costed proposal for consideration by the Secretary of State.