The Housing Corporation has decided to open the whole of its £3.5bn grant allocation to private developers, beginning with this summer’s 2006/08 bidding round.

The disclosure came as the corporation revealed it had received 171 expressions of interest for the £200m allocation it had previously made available to the private sector, the bidding for which closed this week. This was ringfenced from the £1.67bn allocated to 2005/06.

It is understood that all the major housebuilders and many commercial property developers have registered an interest in the grant allocation for this year and next.

Jon Rouse, chief executive of the Housing Corporation, said: “It is clearly evident that developers are really up for it. The expressions of interest add up to £5bn worth of schemes. In this bidding round, the grant is limited to £200m. But in the next round, the entire £3.5bn allocation will be opened up to the private sector.”

Neil Hadden, the corporation’s deputy chief executive, said it intended to award grants to 10-12 large programmes to be selected in July. The bids would be judged on criteria such as financial standing, technical ability and geographical area.

“Costs will also be a factor; we are obviously looking for value,” he said.

It is understood that the change in policy is being driven by the Treasury, which believes that giving grants to the private sector will bring economies of scale and help to cut development costs.

The Housing Corporation plans to produce a league table of development costs for all those bodies that receive grants.

Housing associations are fighting against allocating grants to developers. They say they are at a disadvantage when competing with private housebuilders for public funds because they are heavily regulated by the Housing Corporation, which adds to their costs.

Developers that choose to manage the units they build rather than pass them on to a registered social landlord will be assessed by accredited agencies.