Aled Roberts, from the Welsh Local Government Association, said the improvements bill could not be met unless the policy was changed.

All councils in Wales have to reach the Welsh Housing Quality Standard by 2012.

Councils who cannot finance the improvements will need to transfer stock to the private sector, the assembly government has said.

The bill for the improvements is estimated to be between �3bn and �4bn.

The Welsh Assembly Government has said councils who cannot finance the improvements from their own resources will need to transfer housing to a Registered Social Landlord.

It's clear that the treasury will not allow local authorities to increase their borrowing, and that means that private money has to be obtained Cllr Aled Roberts

But Wrexham Council leader Aled Roberts told BBC Wales' Maniffesto programme that councils throughout Wales were worried this option would be rejected by tenants.

He said: "I think the major concern given experiences in England and in Wrexham is what is the position if our tenants vote against?"

Council tenants in Wrexham voted against stock transfer over 18 months ago.

And in a recent survey among 10% of the tenants, the view against transfer has hardened - even though the council has had to make cuts in its housing services, Mr Roberts said.

Only one council in Wales - Bridgend - has successfully transferred its stock to a housing association.

Cllr Roberts told the BBC only seven or eight councils in Wales would realistically be able to meet the standards in-house.

He added: "The real message that has to be got across is that councils will not be able to deliver the improvements due to central government restrictions on public sector borrowing.

Housing summit

"It's clear that the treasury will not allow local authorities to increase their borrowing, and that means that private money has to be obtained."

Carmarthenshire Council recently voted to retain its stock using a scheme called "prudential borrowing" - new regulations introduced in 2005 where the council has to show that it can afford to pay the money back.

Cllr Roberts said other models need to be explored - such as the "community mutual model", where tenants would have a share in the company that would take over the stock.

A housing summit has been called by the minister responsible for housing in Wales, Edwina Hart, for the end of November where assembly and local government housing officials will discuss the issue.