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The government is examining a merger of the Housing Corporation and English Partnerships as part of a wide-ranging review of housing and regeneration agencies.

ºÚ¶´ÉçÇø has learned that the ODPM is due to publish a consultation paper after Easter, detailing a review of the quangos involved in delivering its sustainable communities plan.

The review will examine the roles and functions of the delivery vehicles in the South-east's growth areas and market renewal pathfinders, as well as national agencies such as the Housing Corporation and EP.

A merger would create a single agency that would combine the corporation's £1.5bn annual budget with EP's site assembly powers. The review will also cover the ODPM's activities, including the Thames Gateway Delivery Unit, the head of which recently left to work in the private sector.

The Neighbourhood Renewal Unit, which oversees the activities of the New Deal for Communities, will come under the microscope as part of the exercise that will feed into next year's Comprehensive Spending Review.

This exercise is being driven by ministers' concerns that the proliferation of agencies set up to deliver the sustainable communities plan are not performing as they had hoped.

Senior EP officials are privately confident that they would be in the driving seat after a merger thanks to the high regard in which the regeneration quango is held within Whitehall under chair Margaret Ford.

A merger between the two organisations was widely mooted three years ago, but has become more likely in recent months as a result of moves by the Audit Commission to reform the way public services are regulated.

A report published by the commission last week proposed that a single organisation be responsible for all public services in a given area. This would remove at a stroke one of the corporation's two main functions.

This is a great opportunity for the government

David Orr, NHF

Meanwhile, the creation of regional housing boards with responsibilities for setting out funding priorities has diluted the corporation's responsibility for awarding cash to associations.

John Slaughter, the Home Builders Federation's external affairs director, said housebuilders would welcome a merger. "To the extent that EP has strengthened its understanding of business and the way it works, it could be helpful.

The Housing Corporation doesn't have the same understanding of the private sector that EP has."

David Orr, National Housing Federation chief executive, said: "This is a great opportunity for the government to create the right conditions for more successful, confident and secure neighbourhoods."

But Neil Hadden, chief executive of the Hertfordshire-based Aldwyck Housing Association, said many RSLs would be anxious that a merger would divert attention from the delivery of housing development.

"We need to know whether it's just a matter of moving the deck chairs or if it will make a difference to delivery," said Hadden, who was Jon Rouse's deputy at the Housing Corporation until last year.

EP and the corporation refused to comment.