A Government minister has intervened in a row over a council issuing "misleading" information about stalled plans to raise £45million to repair run-down housing.

Iain Wright, under secretary of state at the Department for Communities and Local Government, has released a clarifying statement following complaints about a Brighton and Hove City Council letter.

The document blamed his department and the Government for the failure of council's proposal to raise money by transferring 499 homes to the ownership of a private company run by the authority.

The letter was signed by council leader Mary Mears and housing cabinet member Maria Caulfield and distributed to tenants of the council's 12,300 homes.

It followed the DCLG's official response to proposals submitted by the authority for approval.

The department called for work to address concerns over finances and the impact on residents and declined to give the scheme the go ahead.

Councillor Gill Mitchell, leader of the opposition Labour group on the council, said the letter from Coun Mears and Coun Caulfield was "wilfully misleading" because it told tenants the DCLG wanted it to disregard a controversial ballot staged in the city in 2009.

She was joined by the city's three MPs, David Lepper, Des Turner and Celia Barlow, and Lord Bassam in calling for a retraction of the letter.

Mr Lepper said: "It is clear that there is no final rejection of the council's proposals in the DCLG response. It simply asks for important information. Nor does it direct the council to hold a new ballot.

"I believe the letter presented to tenants representatives by councillors Mears and Caulfield is dangerously inaccurate and is not helpful in taking this matter forward in a positive way."

In his statement Mr Wright made clear his department had not refused the council's plans.

He said: "We reiterate our desire to work with Brighton and Hove City Council to achieve the required investment for the city's council housing and are currently waiting for more information on their proposal. We hope to move forward quickly and positively to ensure the best for tenants across the city."

The letter was distributed to tenants as the council continued to tried to find a way to deal with the £100 million cost of getting its housing up to the Government's Decent Homes standard.

In 2007 tenants voted against proposals to transfer ownership to a housing association with the financial backing to carry out the repairs.

The council drafted its latest plan in response. It hopes to use the 499 homes as collateral to raise £45 million in loans from banks. Separate moves are being carried out to make improvements through restructured maintenance contracts.

Coun Caulfield said she did not believe the letter was misleading.

She said: "It was our interpretation of what the DCLG had said. We gave it to tenants along with a copy of DCLG's response so they could make their own minds up. Our job is to support the tenants."

The letter was littered with errors including the misspelling of "no mean feet".