'The government cannot claim to promote local democracy on the one hand, while imposing unreasonable restrictions on councils on the other,' said ADC housing chair Paul Jenks.
The new rules mean that councils will have to meet the cost of housing benefit to cover any rent increases agreed above government guidelines. To date these costs have been met by government.
Most councils already do their utmost to keep rent increases down as far as possible. But cuts in government subsidy mean that many councils, in consultation with tenants, are forced to increase rents to enable them to maintain present levels of service and carry out essential repairs and improvements.
Paul Jenks said: 'Although keeping guideline rent increases to the level of inflation makes sense, imposing severe financial penalties on councils who need to find extra resources represents a major erosion of local democracy.
'David Curry's assertion that these measures will encourage councils to pursue increased efficiency through measures such as compulsory competitive tendering is hollow. All the evidence shows that CCT increases rather than lowers costs.'