A Government programme aimed at reviving the housing market in depressed areas has proved more successful at demolishing homes than building new ones, a report published today has found.

The Pathfinder initiative was set up in 2002 to tackle dilapidated housing in depressed areas of England. Local pathfinder schemes have since invested more than £2bn in either renovation or demolition followed by rebuilding.

However, a report from the Public Accounts Committee of the House of Commons found that while 40,000 properties have been refurbished through the schemes, only 1,000 new homes have been built to replace the 10,000 demolished.

It also found that while the number of homes suffering from low demand in the nine Pathfinder areas in the North of England and Midlands has declined since the programme was launched by then deputy prime minister John Prescott in 2002, the fall has not been as fast as in other parts of England.

Pathfinder projects were set up in Newcastle and Gateshead; Hull and East Yorkshire; South Yorkshire; Birmingham; North Staffordshire; Manchester; Merseyside; Oldham and Rochdale; and East Lancashire.

The report also claims that the initiative threatens the historical character of some local areas, with houses sometimes being demolished against the wishes of local people, and that waiting lists for affordable homes have doubled in some areas.

Committee chairman Edward Leigh said the programme had been "more successful at demolishing old homes than at building new ones".

He added: "The Department for Communities and Local Government must work to foster confidence among local residents, especially where the programme has led to community stress.

"It does not help where demolition plans threaten the distinctive historical character of neighbourhoods.

"The desire of those who wish to continue living in their areas should not be disregarded. Ways need to be found of helping existing residents bridge the gap between the compensation they receive under a compulsory purchase order and the cost of another local property."

"Even though the programme is now five years old and some £2.2bn investment has been committed, it is difficult to tell whether pathfinder interventions are having any more effect on local housing demand than the normal operation of the market."