However, the 132 eligible debt-free councils were given just six days to apply for the surprise ODPM concession.
Regional government offices told the local authorities involved, mainly from the south of England, on 2 December. Responses were required by Monday.
The grants replace government credit approvals, which allowed councils to borrow money to pay for new housing. Many debt-free councils chose not to take out the loans, wanting to remain without debt for political reasons.
The sudden move has been seen as a concession to councils hit by the sudden removal of local authority social housing grant.
When the £500m grant was ended in February, many council housing projects were left with a funding gap. Since then the government has made a series of concessions, ensuring as many as possible of the estimated 7000 homes that depended on LASHG received transitional funding.
Bernice O'Reilly, leader on regional housing strategy at the Government Office for the South-east, said: "Councils still get to be debt-free and have the advantage of money coming back to their area, to be spent on housing. LASHG ended quicker than councils expected. They were in the middle of some things that they were unable to pull forward and perhaps this is a way of finishing things."
But Paul Wenham, finance director at debt-free Waverley council, said: "This only goes part of the way to replacing the money we will lose through capital receipts pooling and the ending of LASHG."
The councils will get the money through next year's single regional funding pots for housing. It will be paid to the Housing Corporation to spend on housing projects in debt-free local authorities.
The change is a way of freeing up money that would otherwise be wasted. It also brings debt-free councils into line with others that get grant rather than credit approvals for housing.
The change has been rushed through to meet ODPM's January deadline for funding allocations from the new single housing pot.
the council could get about £1m through the new grant.
However it had previously received £1.6m in local authority social housing grant, which enabled it to pay for 32 new homes a year.
The council will also lose £2.4m when capital receipts from sales of council housing are "pooled" by government to be spent around the country.
He said: "We welcome this but it only goes part of the way to replacing the money we will lose through capital receipts pooling and the ending of local authority social housing grant."
It is not yet known whether the debt-free councils will receive grants in future years.
Source
Housing Today
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