A letter to be sent to housing minister Lord Rooker next week, signed by council officials, project bidders and their financial consultants, will say that PFI housing contracts are unaffordable.
Councils have been complaining since last autumn that their PFI subsidies have fallen because they are linked to interest rates, which have declined steadily. They are also annoyed that some councils receive more money from an alternative method of funding housing stock improvements, which involves the establishment of "arm's length management organisations".
One signatory said councils had become frustrated by the government's failure to address the problem. The signatory said: "It's getting to the point where councils cannot sign a deal because there is not enough subsidy."
Under the contract terms, the private sector provides maintenance and refurbishment work to public sector housing over 25-30 years.
It is getting to the point where councils cannot sign a deal because there is not enough subsidy
Unnamed signatory to PFI letter
The letter states: "Your [the Office of the Deputy Prime Minister] civil servants have been made aware of these problems for a number of months. This consultation was not taken into account and as a result the sector is starting to, and will continue to, experience severe problems unless action is taken."
The signatories want to see PFI housing funding linked to a fixed interest rate, as is the case with other PFI sectors such as health and education. Council officers say this would add greater certainty to funding arrangements.
It is believed that a decision of this kind would require a change in legislation as housing is funded under rules established by the Housing Revenue Account, a legislative hangover of the Conservative government.
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