Conservatives pledge to give councils the fourth way

The Tories would sanction this in an attempt to return power to local authorities.

The party is also prepared to reverse its seminal 1988 decision to deny councils the funds to build housing.

The funds were instead channelled through the Housing Corporation to housing associations.

A Conservative source said: “Our position has changed from the 1988 Housing Act.

“We want to enable councils to do whatever they can. Why should they be blackmailed into choosing arm’s-length management, transfer or the private finance initiative when funds and opportunities are there to do otherwise?”

Councils currently cannot draw in more funds to help get their stock up to the decent homes standard without setting up an ALMO, using the PFI or transferring. They have long lobbied for this to change for top-performing councils whose tenants want to stay with them.

But the Conservatives’ strategy was greeted with derision by housing providers.

Sarah Webb, director of policy at the Chartered Institute of Housing, said: “It’s very easy to make these sweeping statements when you don’t have to come up with the money.

“Unless they have found a new funding stream, I doubt very much that housing would be first in the pecking order when the Tories were divvying up the available cash.”

The National Housing Federation has also hit out at Conservative proposals to reform the right of social housing tenants to buy their homes, branding the “right to own” plan a “poor use of public resources”.

In a letter to Conservative housing spokesman John Hayes, the NHF said extending discounts on right to buy to housing association tenants would be “impossible to finance [and would] exacerbate the current shortage of affordable housing”.

The letter claimed that the Tory proposals would result in a net loss of 4000 affordable homes each year because of the extra demands it would place on Housing Corporation funds.