Move follows public spat between London mayor and communities department over investment policy

The Homes and Communities Agency is set to consult housing associations in the next few weeks on taking stakes in future affordable housing developments.

The agency attempted to invest in affordable homes for sale earlier this year, but the move was vetoed at the eleventh hour by Margaret Beckett, the housing minister at the time.

The latest plans are seen as vital to providing better value for public money invested in new homes, and have been worked up with the communities department. The consultation will launch in September.

A source close to the proposal said: “We envisage a consultation with housing associations on offering a mix of equity and grant funding next month. Officials are behind the principle – but it has to be cleared with the minister.”

The HCA has to start thinking how it can get more for less

Richard Capie

The HCA can already take equity stakes in private developments, but has so far been excluded from investing in housing association schemes.

In March, a £42m scheme with the Greater London Authority and London & Quadrant housing association to turn private homes into subsidised homes for sale was blocked by Beckett after she claimed plans to take equity in the homes had not been agreed in advance. This caused a row between London mayor Boris Johnson and the government. An amended scheme without equity investment was later allowed.

The move is vital because of concerns the HCA may have much less funding in future. It has already committed 80% of its £8.4bn grant from 2008-11, and the equity scheme would allow it to start to generate an income.

Richard Capie, director of policy and practice at the Chartered Institute of Housing, said: “The HCA’s got to start thinking about how it can get more for less.”