The news emerged at last week's urban summit after a presentation at a fringe meeting by David Smith, founder of the American Affordable Housing Institute. He described how such breaks had been used in the USA to encourage the private sector to take part in regeneration projects.
Deputy prime minister John Prescott expressed interest in the idea and encouraged debate on the topic at the summit.
Sally Powell, who sits on the Labour Party's national executive and is a Hammersmith and Fulham councillor, said she would try to convene a meeting between Smith and Ed Balls, chancellor Gordon Brown's chief economic adviser. Labour sources say that Powell is close to the party's big-hitters and will be able to arrange the meeting.
Speakers at the fringe event, who included Land Securities chief executive Ian Henderson and Argent chief executive Roger Madelin, appeared to back the idea.
Powell said: "It is interesting that the private sector is backing the idea."
The tax credits would be given to private sector companies to encourage them to develop regeneration projects in key areas selected by the government. They could also be traded in the market and used to secure low-risk borrowing – because they are, in effect, guaranteed by the government. In the USA the credits are used to get affordable housing schemes off the ground.
Industry sources argued that the credits could be less costly to the government than social housing or regeneration grants and would offset the taxation developers pay on profits.
However, one source warned that Brown might frown on the introduction of the scheme because it might focus regeneration in too few areas, where the companies could obtain tax credits.
The fringe event, entitled Financing Renaissance – What More Needs Doing?, focused on the importance of the private sector in regeneration.
Henderson, who chaired the meeting, said the private sector had not been given the profile it deserved at the urban summit.