The Housing Minister Grant Shapps says councils should keep the rent from council tenants rather than have it handed over to central Government.
"For far too long, councils have been left hamstrung in their efforts to meet the housing needs of their residents by a council house finance system that is outdated and no longer fit for purpose.
"The Housing Revenue Account subsidy is in urgent need of reform.
"Subject to the Comprehensive Spending Review (CSR), we will offer councils the opportunity to keep the rents they collect and the receipts from any house or land sales.
"This is a key step to transfer powers to councils and communities, so they are free to improve their local services in a way that best meets the needs of local people."
A spokesman for the Department for Communities and Local Government adds:
"In return for this greater freedom, some councils would take on additional housing debt – but no council will take on a level of debt that is not sustainable for the long term."