This looks like a job for ... Superagency

Today: the ability to regulate, a programme of initiatives or the right to distribute a pot of government funds. Tomorrow: perhaps not the world, but at least unprecedented control over the country's housing and regeneration. Those are the powers that a new super-agency could be wielding if the Housing Corporation and English Partnerships merge.

The date for the merger has not been fixed - indeed there are mutterings that the Treasury is getting cold feet, worried that the shake-up could divert attention and resources away from the need to deliver - but few people doubt that it will happen, following the ODPM's April announcement of a review of government housing and regeneration agencies. The long-mooted shake-up looks set to create a super-agency that will have an enormous influence over England's built environment.

As well as merging the Housing Corporation and EP, the review could result in the Department of Communities and Local Government's (DCLG) housing and regeneration delivery functions all being hived off to the new quango. If ministers are bold, the Decent Homes programme, private finance initiative (PFI), arm's length management organisations (ALMOs) and the Neighbourhood Renewal Unit could all find themselves in what promises to be a formidable superpower.

Geoff Zitron, director of housing consultancy Tribal, says: "It won't be worth it unless the government goes for the mega option, which is not just putting together the Housing Corporation and EP, but bringing the project management functions in from the DCLG of things like PFI and ALMOs. Unless they do the full restructuring, it won't be worth the two years' disruption."

"Clearly there's potential to add value on the development side," says Southern Housing Group chief executive Tom Dacey. Creating one agency would cut down what he describes as the "bewildering array of bodies", all of which have their own separate procedures that combine to slow down decision making.

Chartered Institute of Housing (CIH) policy director Sarah Webb believes that the combination of EP's land assembly powers and the corporation's £1bn per year funding pot will stimulate greater private investment. "If you can put in place the regeneration of the shops and the schools, you take away some of the risks that put private investors off," she says.

HTA Architects managing director Ben Derbyshire says the new agency would be able to make much longer-term financial commitments to projects, with particular benefits to the bigger and more complex regeneration and growth area projects. The new set up would also enable registered social landlords to get involved at an earlier stage in developing EP-owned sites, rather than having to piggy back on developers, he says.

One immediate benefit of merger would be an end to EP competing with housing associations for sites that the corporation has already earmarked grant for. "The development process should be a lot smoother and more efficient," says National Housing Federation (NHF) policy director Danny Friedman. "You could have a different mixture of provision for the market in different places." As an example, he says, the new agency could build low-cost home ownership schemes in high-value areas by providing cut-price land instead of grant.

Unless they do the full restructuring, it won’t be worth the two years’ disruption

Geoff Zitron, Tribal

Home Builders Federation (HBF) external affairs director John Slaughter goes further, arguing that the super-agency is the chance for a wholesale rethink of the way the government provides affordable housing. "The new agency should be focusing on how it should be adding value to the area where the public interest needs to be involved and promoting more efficient partnerships, but not to do that in ways that crowd out the private sector," he says. "The danger of the current system is that it's too prescriptive and becomes an enemy of delivery."

The HBF argues in its submission to the review of agencies that the new organisation should be less prescriptive than the corporation has been about the kind of affordable housing that housebuilders provide with their grant. It says developers should be free to respond to market conditions by, for example, providing low-cost home ownership and shared equity products instead of social rented accommodation.

Going for the big bang approach advocated by Zitron would also enable the super-agency to address the often wide-ranging social problems that bedevil rundown areas as well as the physical ones. Friedman proposes that instead of having separate programmes for social and physical regeneration, local communities could bid for resources from the new agency based on their own priorities.

Illustration by JAKe

A shake-up on this scale inevitably throws the spotlight on the future of the regional development agencies (RDAs), which have been widely criticised for failing to pull their weight on the physical regeneration front. Chris Brown, chief executive of the Igloo Regeneration Fund, says: "In a large organisation, there's a very big possibility of the DCLG regeneration money that's going to the RDAs coming back in. The RDAs have not made a particularly good fist of it."

Both the NHF and British Urban Regeneration Association have called for the RDAs' physical regeneration functions to be handed over to the new agency. But although John Prescott may have been persuaded to give up his grace and favour residence at Dorneywood, Ecotec head of housing Brendan Nevin believes that the government is unlikely to prune back so severely one of the few lasting legacies of the deputy prime minister's regional devolution programme. "I can't see them going down that route; it would be humiliating," he says.

Whether big is beautiful is a moot point, however. The British Property Federation has expressed worries that the new body will have too many fingers in too many pies, diluting its E E focus. A more powerful agency could also ruffle feathers in town halls, where EP's existing planning powers have often been resented.

Local Government Association vice-chair Richard Kemp believes that the key to making the new agency acceptable to councils is the government's willingness to carry through on its recent pro-devolution rhetoric. The CIH's Webb says that Communities Scotland, the Scottish Executive's recently created housing and regeneration agency, which has many of the powers being proposed for the new agency, provides a good model for the new body.

The current system is too prescriptive and can become an enemy of delivery

John Slaughter, HBF

Nevertheless managing the transition will be difficult. The destabilising impact of the merger can already be detected in the departure of recently appointed EP chief operating officer Dennis Hone, the first of many, doubtless.

There will inevitably be jockeying for position within the new organisation. The corporation has a bigger budget and staff team, but EP is reckoned to be in bigger favour in Whitehall, reflected in chair Margaret Ford's recent elevation to the House of Lords as a Labour peer. By contrast, the corporation is reckoned to have lost brownie points after the Treasury pet project to increase competition for social housing grant resulted in just 1.6% of the quango's National Affordable Housing Programme going to private developers. As a result, corporation chief executive Jon Rouse's star is not quite as bright as it was when he moved over from Cabe.

And the merger will bring together two organisations with very distinct cultures. The corporation remains firmly rooted in the social housing world despite its half-hearted recent embrace of the private sector. EP, by contrast, had little involvement with housing until a few years ago, largely concentrating on commercial development. Igloo's Brown expresses the concern that EP has possibly become even more hidebound following the shake-up. He says: "The danger is that it will go for a Housing Corporation culture which is about regulation and grant-giving rather than EP's deal-making approach."

Whether the new agency retains the corporation's role as regulator of England's housing associations may seem an arcane point to developers, but it is critical to the direction it takes. A wider government review of its regulatory functions means that it is unlikely that it will be able to keep its responsibilities for both funding RSLs and policing their affairs.

But housing associations and many inside the corporation are unhappy about the prospect of the quango's regulatory functions being hived off to another agency, like the Audit Commission, which deals with purely public sector bodies. They are worried that lenders will not feel that the £40bn worth of loans they have advanced to RSLs will be in such safe hands if the corporation is no longer watching over their affairs.

Dacey says: "It's very important that investment decisions are not made in the dark." Council of Mortgage Lenders policy director Andrew Heywood comments that nobody has yet made a compelling case for the long-term benefits of scrapping the corporation, with all of the short-term disruption that will result.

But Friedman believes the benefits that could flow from the new body outweigh the problems. "There's an opportunity here to create a more strategic vehicle for doing more than building homes on more sites."