The National Audit Office has welcomed improvements in social housing transferred from local council control.

Watchdog chief Sir John Bourn said John Prescott's department has made considerable headway in the condition of transferred housing.

The report also praises the quality of services to tenants since the Office of the Deputy Prime Minister was handed the responsibility in 2001.

Bourn said that the transfer programme has brought about "much-needed improvement" in tenants' homes.

"Most tenants have also benefited from improved housing services," he said.

The process involves the handing of control of council homes to registered social landlords or housing associations.

The NAO's report complements a parallel Audit Commission report on how transferring local authorities have carried out their continuing responsibilities for housing.

The Conservatives, who introduced the scheme in 1988, welcomed the report, saying it "correctly identifies" that a cost neutral process had improved the lives of tenants.

However Tory housing spokesman Geoffrey Clifton-Brown said that "despite these successes" the government is building fewer affordable homes.

"This is unacceptable for the most vulnerable families in our country today," he said. "The government must rapidly address this problem."