WAVERLEY council tenants' homes cannot be repaired to government standards while they are still owned and managed by the council.

That is the verdict of a report to go before councillors on Monday, as Waverley gears up for its second major re-evaluation in four years of how to manage its housing stock.

In 2000, a narrow majority of tenants voted against the Tory-proposed transfer of their homes from Waverley council to a housing association, after a bitter campaign against the proposal by opposition Liberal Democrats.

Now the option is one of two being considered by the now Lib Dem-controlled council.

The possible Lib Dem U-turn has been prompted by the fact that the government now takes 75 per cent of the cash raised when Waverley sells a council house to a tenant. Previously, Waverley kept all the proceeds and used the money for repairs to its 5,620 homes.

And while the government has taken that money away, it has demanded that council houses meet so-called "decent homes" standards by 2010. It has ordered all councils with housing stock to assess how best they can meet these targets.

Waverley officers say maintaining the status quo is not an option. A housing association would be able to pay for the repairs because it would be able to borrow more money and can keep all rent revenue.

Fifty-four per cent of Waverley-owned homes do not meet the decent homes standard and officers predict this figure will rise to 90 per cent in 10 years' time.

Over the next seven years, Waverley says it needs £44 million to repair its homes to the decent homes standard.

The council would also need £34 million for what it calls other essential or important work not covered by the decent homes standard, such as health and safety work, dealing with asbestos, redeveloping garages and garage areas and upgrading communal TV aerials.

Independent financial consultants have calculated that if Waverley does nothing, it could only afford to spend £33 million on the works needed.

The full programme of general maintenance and other works will cost £201 million over 30 years.

The council has sent leaflets to its tenants explaining the problem and asked for their views on four options: keeping the stock of homes, transferring the management but not ownership of its homes to an Arms Length Management Organisation (ALMO), transferring the management and ownership of its homes to a housing association (stock transfer), and the use of a private finance initiative (PFI).

Sixty per cent of tenants completed the survey, which also asked them about the state of their homes. Of the two-thirds who expressed a preference, 40 per cent preferred stock transfer, 29 per cent ALMO and 28 per cent stock retention. Only two per cent preferred PFI.

A second survey is being carried out to get further opinion on wholesale stock transfer and ALMO, which the council believes are the only realistic options.

David January, Waverley's director of housing, said this week that keeping and managing the housing stock is not viable and that the key question is whether Waverley tenants want their homes owned by the council, as would be the case under the ALMO option, or whether they want them fully repaired, which would only happen if both the ownership and management of the housing stock is transferred.

Under both ALMO and stock transfer, Waverley would receive a lump sum. But under ALMO, the council would only be left with a net lump sum of about £20 million, compared to about £40 million if Waverley transferred the ownership and management of its houses, and about half of that money could be used fo fund much needed affordable housing.

Wholesale stock transfer would also fund the other repairs Waverley would like to do. ALMO would not.

Mr January said rents would be the same whatever the case and that tenants are likely to be afforded the same rights under a housing association if a government bill is approved.

Even if it is not, the council could agree a contract with a housing association to ensure tenants get the same rights.

Waverley's portfolio holder for housing Victor Scrivens said: "I am very angry that the government has forced Waverley to look again at these options. It appears to me we need to conclude, albeit reluctantly, that we will be unable to provide our tenants with decent homes and do other essential work through stock retention."