Sinn Féin, SDLP and Ulster Unionist politicians have expressed concern about plans by Northern Secretary Peter Hain to abolish the Housing Executive, in his continuing overhaul of public administration.
On Tuesday, in what amounts to a virtual assault on Northern Ireland's quango system of public administration, Mr Hain said he would cut the number of such agencies by more than a half from 154 to 75 in three years' time.
This is a further stage in his Review of Public Administration unveiled in November, under which the number of councils is to be reduced from 26 to seven "super" councils by 2009, and education and health are to be administered by a single authority each instead of five and four agencies respectively.
There was a mixed political reception to his overall plan but the proposal that generated most controversy was his wish to abolish the Housing Executive by 2011, and to transfer its housing allocation powers back into the hands of local councillors.
While Mr Hain gave assurances that he would not consider axing the executive until the seven councils were "bedded in", his plan caused considerable political alarm.
Unionist local government discrimination in the allocation of houses was one of the key issues which sparked the civil rights movement of the 1960s.
Former SDLP politician Austin Currie and members of the Gildernew family - related to Fermanagh-South Tyrone Sinn Féin MP Michelle Gildernew - highlighted this issue when they squatted in a house in Caledon, Co Tyrone, allocated to a single Protestant woman while Catholic families were denied the house.
This led to the formation of the Housing Executive in 1970 which took over responsibility for impartial allocation.
Sinn Féin spokesman on public administration Alex Maskey said he supported the quango "cull" but councils must not be given the power to allocate housing.
"While there is strong argument for councils to have a greater role in housing it will be a long time before nationalists will trust unionists with powers of housing provision or allocation."
SDLP councillor Éamonn O'Neill said: "Those who remember the origins of 30 years of conflict will know that housing was one of the most contentious issues and causes of the Troubles.
"To now strip the organisations of several of their major functions and powers is nothing short of vandalism."
In relation to his general blueprint, Mr Hain said he had reconsidered his decision to allow a maximum of 50 councillors to each council and had decided to increase this to 60 members.
More than 100,000 people work in the North's public sector. This restructuring is estimated to save £200 million.
