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Government regeneration quango English Partnerships is exploring a new approach to building homes that would effectively result in it becoming Whitehall's national housebuilding arm.

EP has been in closed-doors meetings with London housing bodies – including the Greater London Authority and the Association of London Government – that would result in it buying up to 30 ha of brownfield land in the capital, Housing Today can reveal.

EP will then act as lead developer for the land. It hopes to develop up to 3000 homes, 2000 of which will be for sale at below market value – and will contract housebuilders to do nothing more than build the homes. As EP is taking on all the risk, the hope is that housebuilders can be encouraged to lower their profit margins. This will allow EP to sell on as many of the homes as possible at a significant discount.

EP raised the veil over the key project last Friday when it advertised for a development partner, which it hopes will be in place by 2004.

£70m has been set aside to purchase the brownfield land, which EP expects will be formed from a number of pockets of derelict land. The first of these is likely to be in London Docklands, where EP also owns the Greenwich Millennium Village project.

EP presently owns very little land in London. It hopes to build substantially on its holdings so it can deliver the government's Communities Plan targets for extra 200,000 homes in the South-east in the next 15-20 years.

The regeneration quango, which has been transformed since Margaret Ford and David Higgins recently took over as chair and chief executive respectively, will use this radical approach in London as a pilot to explore the response to its move into taking the lead on key developments.

If the pilot is successful, EP will look at rolling the approach out to other areas across the country.

John Lewis, director of the strategic joint ventures division at EP, said: "We want to work out if we can exploit economies of scale in large schemes to be able to sell homes for less. We will hold the land and deal with the planning and selling side of things – all developers would have to do is build the homes. Hopefully this will really speed up delivery."

Lewis added that if EP was successful in selling homes at, for instance, 70% of their market value, but retain a 30% stake, that this latter "equity share" could be converted into capital.

"We are looking at a funding vehicle to specifically exploit this and perhaps there will be a role for housing associations in using this money," Lewis added.

Steve Douglas, London director of investment and regeneration at the Housing Corporation, said: "This will build on the relationship between EP and the corporation. EP uses its clout to provide land and facilitate construction; the corporation uses less grant to fund subsequent schemes due to the extra capital realised through the retained equity element."