Councils across the North East have been stripped of £13m - with the cash used to subsidise housing in wealthier parts of the country.
The money was taken from local authority budgets to pay for a Government scheme called the New Homes Bonus.
But a row broke out after the Department for Communities and Local Government claimed councils had actually enjoyed a £29m grant thanks to the scheme.
Newcastle City Council leader Nick Forbes accused the Government of a “shameless” accounting trick.
The two different figures are a result of the way New Homes Bonus funding is raised and distributed.
Councils get extra funding if they succeed in increasing council tax revenues by ensuring new homes are built or by bringing empty homes back into use.
But the funding actually comes from local councils in the first place. A proportion of their grant from central government is “top-sliced” and put into a pool of money which is then redistributed to authorities.
The initial grant is based partly on levels of deprivation in a local authority area. This means that when money is taken to fund the scheme, the councils serving poorer communities tend to pay more.
But authorities in wealthier areas may find it easier to attract developers to build new homes, or attract residents to properties which had previously been empty - so that they receive a large part of the cash paid out.
The Department says North East councils will gain £29,318,614 in 2014-15, with Newcastle receiving £3.6m, Durham receiving £6.7m, Gateshead receiving £1.4m, Northumberland receiving £7m and Sunderland receiving £2.2m.
But officials at Newcastle City Council calculate that the region is actually paying out £42.3m - which means it makes a loss of £13m.
On balance, Newcastle upon Tyne loses £1.8m, Durham loses £887,000, Gateshead loses £2.2m, Northumberland loses £484,000 and Sunderland loses £2.9m.
The only council in the region to enjoy a net gain is Stockton, which gains £697,000.
Coun Forbes said: “This is a shameless and disgraceful way of hiding the disproportionate cuts that North East councils face.
“The New Homes Bonus is one of the ways in which the Government takes money from areas like the North East and redistributes it to other parts of the country.
“While this looks like giving, they are actually taking away far more.
“It’s a bit like a burglar dressed as Santa Claus.”
Housing Minister Kris Hopkins said the policy was a change from the approach of the last Labour government, which tried to force councils to authorise new housing based on plans drawn up by regional bodies.
By rewarding them financially for new homes, the Government had given authorities a reason to back housing, he said.
“Councils have received over £2bn for their part in getting Britain building, and leading to housing construction reaching its highest levels for seven years.
“And they are free to spend the money any way they like to benefit their local communities – whether that’s supporting frontline services, providing new facilities or freezing council tax.”
Communities Minister Stephen Williams also welcomed the number of empty homes being brought back into productive use.
He said: “The Government is doing everything possible to tackle the problem of empty homes and urban blight, and the New Homes Bonus is a shot in the arm for councils tackling the problem of abandoned homes and urban blight locally.
“The number of long term empty homes has already fallen by 93,000 and we are now going further, giving councils the incentive to bring people, shops and jobs back to once abandoned areas, and to provide extra affordable homes we so badly need.”
Earlier this week, Labour leader Ed Miliband launched an independent Housing Commission, which will look for ways of increasing the supply of new homes in England to more than 200,000 a year by the end of the next parliament.
And he repeated a pledge to stop housing developers “hoarding” their land.