Run-down council homes in three North-East communities will be repaired under a £150 million initiative which will strip the local authority of day-to-day control.

Gateshead, Newcastle and Easington councils have been given the go-ahead to set up arms length management organisations (ALMOs) to manage their housing stock.

The move will trigger £150 million of government investment between 2004 and 2006 - with Newcastle scooping £64 million, Gateshead £63 million and Easington £23.6 million.

However, the money will only be handed over if each council achieves a two-star rating when inspected by the independent housing inspectorate.

And the price the authorities must pay for winning the cash is to give up day-to day responsibility for housing management, although they still retain ownership.

There is no guarantee that any council's entire bid will be funded.

Newcastle has said it needs £368 million to bring its homes up to scratch, Gateshead £232 million and Easington £117.3 million.

The office of the deputy prime minister said it would make "further tranches" of funding available, if each council continued to score two stars.

ALMOs are seen as a "halfway house" between local authority running of council housing and full transfer to not-for-profit housing associations and other social landlords.

Full transfer was criticised last week by the Commons public accounts committee for wasting billions of pounds of public money, because of higher repair costs in the private sector.

Keith Hill, the housing minister, said: "This extra funding will help improve tenants' quality of life and make sure all their homes are in a good state of repair with modern facilities."

Another ten English councils were also handed a share of £1.5 billion funding pot today.

A further 21 local authorities - including Stockton-on-Tees - are already pressing ahead with managing housing stock through ALMOs, under previous announcements.

The ALMO, a local authority-owned company, will be run by a board of tenants, councillors and independent members.

* More than £99m will be spent on repairs and improvements to council houses in Hartlepool after tenants voted to transfer the ownership and management of their homes to a not-for-profit housing organisation.

In total 4,818 tenants voted in favour of transferring from Hartlepool Borough Council to Housing Hartlepool, meaning the 8,000 houses are on course to transfer early next year.