Council tenants across Wigan face an inflation-busting increase in rent next year, the local authority has warned.
Cabinet members have approved a 7.37% rise for 2011, which means an average hike of £4.66, to £67.86 a week.
Wigan Council said it was being forced into the move by government changes to the way rents are collected that will leave it with a £8m shortfall.
Leader Lord Peter Smith said they were being forced to give tenants a reduced service at a higher cost.
The Housing Revenue Account subsidy system requires councils to pay rents to central government, which then redistributes among councils according to those most in need.
New government proposals will see councils keep all rent and sales receipts they collect in rents.
But the local authority said the calculation used meant they faced having to return £8m of money earmarked for tenants.
Lord Smith said the council had "no alternative but to increase rents".
"In the past we have been able to reduce and defer passing on an increase to tenants but the coalition government has changed the rules and we have been penalised for being so efficient with our Housing Revenue Account.
"The effect of these proposals on the local housing service would see diminishing resources despite the rent increase.
"These reductions will inevitably leave gaps in repair and maintenance budgets thus impacting on condition and value of the housing stock overall."
The council said some 60% of residents in Wigan directly contribute to their rent and the vast majority of are either on low incomes or on pensions.