Almost 6,000 council homes in Northumberland may be sold off after a study revealed about 50% failed to meet government-set decency standards.
Wansbeck District Council says it faces a bill of £70m to bring its 5,750 properties up to modern standards.
But it claims finances are predicted to fall short by about £10.5m by 2010.
Now it is considering selling off its entire housing stock in an effort ease the cash burden and ensure improvements for tenants.
For the past 12 months the authority has been carrying out a detailed appraisal of its housing stock to comply with the decent homes' standards the government wants local authorities to meet by the year 2010.
The council says it may now sell off its stock to a housing association or create a not-for-profit company and borrow the required cash.
Early next month tenants will be consulted, followed by a series of road shows and meetings to explain both options to them.
Councillor Alan Douglas, the Wansbeck Cabinet portfolio holder responsible for housing, said: "Clearly we have a difficult decision to make about how our housing stock should be managed in the future.
"What is also clear is that we cannot continue to manage our houses ourselves in the way we have done as landlords, because massive investments are needed to ensure we meet government standards for providing everyone with what it terms a decent home."
If homes are sold off, some housing staff jobs may be transfered from the authority.