After Birmingham

When Birmingham's council tenants voted against the transfer of their 93,000 homes to new landlords, there was a tendency to write it off as a consequence of the almost interminable political wrangling over the policy within the council. Glasgow, it was noted, had obtained tenants' consent for a transfer of a similar size, so there was no need to assume that the whole transfer programme was on the rocks.

The argument was true – but far from sufficient. Yes, there was severe political division in Birmingham, whereas, apart from the far left, there was broad consensus in Glasgow in favour of transfer. But it is also the case that Glasgow had already been through a series of small-scale transfers, whereas Birmingham was planning a "go-for-broke" hole in one, which was bound to be long and difficult. In addition, Glasgow's tenants had a bigger incentive to vote yes: debt was a much bigger issue there because tenants were paying about £20 a week directly from rents to support debt charges, whereas south of the border, these were met from the general subsidy.

With Walsall, Sunderland, Bradford and Liverpool winning yes votes for transfers, the government could argue that Birmingham was a blip. But when Sheffield bailed out of a transfer of some 60,000 homes to look at alternatives, it was no longer possible to ignore the fact that the government's targets for refurbishment and the finances available for the job were both under severe strain. The government's target for transfers is some 200,000 homes a year. If it is to meet its aim of bringing the entire social housing stock up to decent home standards by 2010, it needs to get the stock of council housing down from the present 2.5 million to about 1.4 million to match the funding available for properties retained under council control.

The situation from the government's point of view has been made worse by the spin put on the Local Government Bill by Stephen Byers. He had suggested that the bill would relax the prudential borrowing rules for councils with large debts, opening the way for them to borrow for stock refurbishment. In fact, the bill contains no such provisions.

Nor does the programme for councils to devolve stock to an arm's-length company offer a way out of the impasse for authorities like Birmingham – they are a long way from winning the Audit Commission Housing Inspectorate's two- or three-star rating, which is a prerequisite to enter into that programme.

So where does the government go? Three options are being chewed over. The first is to find ways of lubricating the transfer programme by making partial transfers, in particular, more attractive. At issue is the question of write-off, not just of the principal sum of the housing debt, but funding the breakage costs by meeting the Public Works Loan Board's loss on interest charges. In addition, there is pressure for a dowry for transfers in the shape of regeneration funding.

The government desperately needs to get more big urban authorities into the transfer programme – it cannot afford to lose any more big numbers

The second option is to make more money available for the arm's-length programme. So far, 21 councils have been approved for the programme and eight have set up companies. Derby is probably the leading light in this programme with its three-star rating and consequent access to funding. At the time of writing, Leeds is balloting. The Treasury has hinted that it may be able to find extra cash in the fundamental expenditure review, but it will want the assurance that the criteria for acceptance into the arm's-length programme will not be diluted.

Finally, the government is anxious to find ways of involving tenants more closely in the transfer programme. Although three ballots out of four are still being won, it desperately needs to get more big urban authorities into the programme and it cannot afford to lose any more big numbers like Birmingham and Sheffield.

The lesson may be that if the Birmingham-style "blockbuster" transfer is no longer easily winnable, urban authorities will have to look harder at incremental transfers, perhaps even estate by estate with heavy tenant involvement. The government is already showing more interest in this approach following the success of the "take each match as it comes" approach in Liverpool.

Nor should Glasgow cause too much gloating north of the border: a failure there would be much more catastrophic than in England because no alternative options have been developed.