Local authorities undertaking small stock transfers should band together to take out a bond on the capital markets, an Office of the Deputy Prime Minister report on financing stock transfers recommended today.
The report, by consultant Ernst & Young, said the bond markets are underused. It also called for measures to allow potential investors to examine transfers and hence stimulate competition.

And it suggested that the government should support high-risk transfers by providing subordinated loans for registered social landlords, dowries and transfers of extra land.

The housing sector gave the report's suggestions a cool reception.

A banker who specialises in housing finance said it would be "impractical" to link transfers together under one bond because each authority would want to negotiate its own terms and follow its own schedule.

He added that the Housing Finance Corporation had been very successful in bringing transfers together for funding and this could present a solution to the problem.

He also said the Estates Renewal Challenge Fund had made good use of government dowries given to help transfers in areas needing regeneration.

Another housing finance expert said: "It would make perfect sense to bunch small transfers together.

" If they did this, their rating would help explain risks and attract third party institutions, who might not be aware of the risks or opportunities of that particular business."

Commenting on Ernst & Young's suggestion that the government pay dowries in high-risk transfers, an ODPM spokesman said: "The conclusions in the report are Ernst & Young's and not necessarily those of the ODPM."

He said dowries and new models of stock transfer would be considered in the PSA Plus review, which examines the effectiveness of policies that deliver the decent homes target.

n A summary of the report, Sources of Finance for Housing Stock Transfers, can be found at www.odpm.gov.uk