Under current rules, local authorities can inadvertently lose housing subsidy on rebates when reviewing rents, and when giving tenants a choice about improvements and services.
Sir George said: 'We propose that authorities should be exempted from the rules and lose no subsidy, provided their policies on rents and improvements are open and reasonable and satisfy the local auditor.
'These changes will help authorities to set reasonable and flexible rents, and involve tenants more in decisions about improvements to their homes, while continuing to protect the Exchequer.
The proposed changes are to the Housing Subsidy rules, and cover the Disproportionate Rent Increase and Modular Improvements rules. Subject to the views of authorities they would be introduced from next April.