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Regional housing boards are planning to divert funds away from helping councils meet the decent homes target to concentrate on funding other local priorities.

The hardline stance is certain to cause tension with councils and the government as the boards attempt to negotiate final strategies between July and October.

The draft strategies now being circulated by the nine boards put specific local priorities such as affordability and private housing standards above the government's decency target. Boards must get their strategies in by July.

The feeling among most of the boards is that councils can meet the 2010 standard through the cash available for the government's three stock options – arm's-length management, stock transfer and private finance initiative – rather than funding from the single regional pots. This could threaten the plans of councils that were expecting to get enough money from the boards to get their stock up to scratch.

For the first two years of the funding system, 70% of the housing investment programme funding is to be allocated to local authorities according to the existing national formulae, leaving the boards with 30% to spend. After two years, the boards will in control of 100% of this money.

There are no figures available at present, but it is understood the change in emphasis would hit a large number of councils across England.

From 2004/05, the regional housing boards will allocate funds from a single pot. This will comprise the former approved development programme – worth £1.4bn in 2003/04 – and the HIP – worth £842m in 2003/04. The boards' strategies have to be presented to ministers by the end of this month.

A source close to a housing board said ministers might object to this ordering of priorities and added that the details would have to be hammered out between the submission of the strategies and the announcement of funding in the autumn.

He added: "All the regional housing boards are coming to the same conclusion. There are resources out there for decent homes, and they want to do something else with the money."

Jonathan Blackie, regional director of the Government Office North-east, and chair of the regional housing board, said that councils should not rely on continued levels of funding coming from the regional board to allow them to meet the decency standard.

He said: "The housing authorities' focus has always been on investing in its own stock. We take the broader view, how it fits with jobs, local demand and regeneration.

"Ultimately it's about making the best use of the money available," he added.

One Essex-based housing strategy head – which comes under the jurisdiction of the East of England regional housing board – said: "The decent homes standard is a concern for us and the fact that it wasn't a big priority [in the draft strategy] is worrying."

The authority would have difficulty raising extra cash if money was diverted from decent homes because it is opposed to stock transfer and would easily obtain ALMO standards.

An ODPM spokesman said any board wishing to divert funds away from the decent homes standard would "have to have a very strong case to put to government".

The spokesman added that the government would take a more "hands-on" role when the strategies are submitted next month.