Private money could be borrowed against the property assets

The Institute of Welsh Affairs (IWA) said a new housing finance company should be set up, which could borrow money at favourable rates.

The move would raise the estimated �3 billion needed over the next 30 years.

Only one council - Bridgend - has so far transferred its housing stock to a housing association.

In March 2004, 60% of tenants in Wrexham voted to reject the transfer of their houses from the ownership of the local authority.

It is estimated that Bridgend council's transfer to the Valleys To Coast Housing Association will lead to �290m being spent on improving housing over the next 30 years, with major economic benefits for the local economy.

The IWA said that maintaining Wales' 160,000 council homes will not be able to be met without a major injection of private sector finance.

TRANSFER BENEFITS: Twice the impact of the �1.5 bn Objective 1 funding in west Wales and Valleys Focus investment in the poorest areas where social housing is concentrated Opportunities to promote affordable housing Knock-on benefits for local economies, including developing skills Source: The Future of Social Housing, IWA

However, the report, commissioned by the Welsh Assembly Government and Principality building society, concluded that there had been a "great deal of misinformation" and "misunderstanding" about the issue.

It said: "There remains a widespread reluctance to venture down this route, including fears by councillors that the local authority role will be undermined, and tenant reluctance to relinquish local authorities as landlords."

The report, which was launched at the Chartered Institute of Housing Cymru conference in Cardiff, recommends that local authorities should follow the example of Newport Council, which appointed an independent housing commission to examine its options.

The council needs to invest �240m up to 2012 to bring its housing stock up to the required standard, but only anticipates resources of �82m.