Treasury is concerned that new-build projects cost more than traditional grant-funded housing

The government is conducting an inquiry into whether the PFI is an efficient way to procure social housing. Building has learned that the Treasury has asked the communities department to carry out the review, which will look at new-build schemes.

In her inaugural speech during the summer, Ruth Kelly, the communities secretary, said the PFI had a role to play. But the Treasury is understood to be concerned that it costs more than traditional grant-funded projects.

The review is part of a wider examination of the options for delivering affordable housing.

Its remit does not embrace housing revenue account (HRA) schemes to refurbish council stock. The results will feed into the communities department’s bid for funds in next summer’s Comprehensive Spending Review. Officials have said the outcome of the review will be unveiled after Christmas.

PFI has proved to be more successful for non-HRA new-build housing than for refurbishment schemes, just a handful of which have been delivered.

“The review is ironic, given that non-HRA schemes are going to timetable and closing more quickly than the HRA ones,” said Coralie Foster, head of social housing at consultancy RSM Robson Rhodes.

The study is understood to be one of the factors holding up the announcement of the fifth round of council housing PFI bids. “The construction industry is getting pretty concerned that we haven’t heard the announcement yet,” said Jane Staveley, a partner at solicitor Beachcroft, who specialises in PFI housing contracts.