The way to resurrect a city

Professor Brendan Nevin says these meetings, which planted the seeds for the market renewal pathfinders set up last April, were nicknamed the "Betty Ford experience". "It really was like people confessing. They would stand up and give their names followed by the number of voids in their area – it was quite disturbing."

Nevin, now director of the North Staffordshire pathfinder, is widely acknowledged as the principal driving force behind the establishment of the nine areas to find ways of tackling low demand. This process culminated in February with the confirmation of a £500m housing market renewal fund in the Communities Plan.

It was Nevin's initial persistence in the mid-1990s that encouraged 46 housing bodies across the North and Midlands to stump up £4000 each to pay him and some colleagues to examine properly the issue of abandoned homes. The research became known as the M62 study as it covered the declining housing areas along the motorway that runs between Liverpool and Hull. Its main finding was that up to 17% of the housing stock along this corridor – about 290,000 properties housing 700,000 people – were at risk of low demand. The worst areas were very heavily clustered around Manchester and Merseyside. To arrest this decline and turn it around, Nevin estimated that investment of about £8bn was needed.

"The problem was nothing new," says Nevin. "There had always been the collective recognition that there was something wrong that caused people to shun certain homes – we had just assumed it was only to do with badly designed council housing. But, very rapidly in the early 1990s, the problem dramatically worsened. Benwell, in the west of Newcastle, pretty much emptied in three years, so from then the issue became much more serious as it became apparent that it wasn't just about out-of-date and undesirable council housing – it was much more than that."

Of the 1 million homes reportedly affected by low demand in England, just under a quarter are in the North-east. Of these, 77,400 are now part of the Newcastle Gateshead pathfinder. An estimated 58,000 of them, housing 175,000 people in areas such as Benwell, Scotswood and Felling, are at risk of low demand. All these areas are within walking distance of the thriving city centre of Newcastle with its pubs, shops and clubs. What's more, they all command fantastic panoramic views across the river Tyne, especially Benwell, which is in what would usually be a city's trendy West End.

The area should be an estate agent's dream pitch, but for one Gateshead resident it turned into anything but.

Medical worker Donna Houston, 32, has just moved from an abandoned estate just off the Sunderland Road in Felling. When she bought her house there in 1995, Houston did not anticipate that in just a couple of years, the price would plummet 50%.

"The area only really started going downhill in the last couple of years, especially with the private landlords just putting anyone in there," she says, sitting in the newly decorated living room of the smart two-up, two-down semi in which she now lives, about a mile from her old home. "They would turn up every so often and dump the latest batch of people off and then disappear – you wouldn't see them until the next time. Things got progressively worse because the people who moved in downstairs gave me trouble all the time. It got so bad that you couldn't even put your bin out without it getting set on fire. It just felt like you were fighting a losing battle. It's all down to the private landlords as far as I can tell – if someone had kept an eye on them, there wouldn't have been as much of a problem."

Houston's experience is all too common and demonstrates that the problem of low demand straddles both the private and social sectors. She was stuck in the limbo of negative equity until she was rescued earlier this year by Gateshead council's Homeswap scheme. She has been rehoused on a nearby estate and has been able to take her mortgage with her, thanks to a grant from the council to cover the shortfall on the sale of her old home – now set for demolition.

Jo Boaden, director of the Newcastle Gateshead pathfinder, says measures announced in the draft Housing Bill to allow the licensing of private-sector landlords in low demand areas will undoubtedly help people in situations like Houston's, but that this alone will not solve the problem.

Boaden is convinced that the work she and her team are doing over their proposed 15-year programme will be a success. "Of course it's going to work. We're going to make it work; it's got to work. What's the alternative? Do we allow the urban core of our big, vibrant, Northern cities to decay? If we do nothing, we leave people in really awful situations. Negative equity, living in places that suffer from abandonment and neglect. It's a huge opportunity and so, absolutely, it will work." She welcomes the announcement by junior housing minister Tony McNulty earlier this month that Newcastle Gateshead is among three pathfinders permitted to access unlimited funds for early work to address the problems. The other two are Merseyside and Manchester Salford. The remaining six will receive a maximum of £4m each (see box on where pathfinders are).

But the Newcastle Gateshead pathfinder team is by no means resting on its laurels after the initial boost of winning government funding approval. The big issue at the moment is collecting enough of the right information about the housing markets affected by low demand so it can present a credible "evidence-based" case to the government in October. After this, the pathfinder will get some of the funding it has been promised. Evidence is also key to winning the support of local communities for the work of the pathfinder.

"Consultation with local communities at an early stage is crucial as this will make or break the pathfinders," says Jonathan Ellis, chief executive of the Empty Homes Agency, which is working closely with many of the pathfinders to help them to develop their ideas. "We also need to consult with prospective residents in order to answer the tricky question of what's going to entice people back to abandoned streets? This is the big challenge and if we can't get it right, all of the effort will go to waste and ruin."

Boaden and her team are acutely aware of this. Walking along the street in Gateshead, she points out an elderly couple making their way slowly from their old "Tyneside flat" to the church a few doors down. Tyneside flats are small, densely constructed Victorian terraced housing, typical of the region and symptomatic of the pathfinder's problems: row upon row of this housing standing empty because it no longer suits people's needs.

As Boaden walks past, the couple notice her council identity badge and harangue her – they live in an area that the local authority wants to demolish to make way for more popular replacement housing. Boaden listens politely and then promises to deal with the situation. "People say they're worried it won't work," she says. "But I think they're wrong. It's a tremendous opportunity to change people's lives."

The success of the pathfinders will be judged by the Audit Commission. The deputy prime minister has given Roy Irwin, chief housing inspector, the responsibility of evaluating their performance. Irwin says: "There is no private burial service for housing that is past its sell-by date and this is why the public sector has to intervene. Our key issue is whether the value of housing now is less than what was paid 10 years ago. Has this left people in a deflationary position and does what the pathfinder is proposing deal with this? We are interested in the decline – society will walk away and leave it and so the pathfinders have to reverse this."

There is presently a £3bn programme of public and private investment flowing into Newcastle and Gateshead, of which the pathfinder is just one part. It is hoped the efforts to regenerate housing, local communities and infrastructure, and to provide employment opportunities will culminate in a successful bid to be European Capital of Culture in 2008. Boaden says: "Obviously we're working in areas of lower demand, so trying to draw some of the higher demand, more vibrant areas and attractions further along the river is tremendously important. What you have to do is find the features that attract people and draw the success of some areas into others."

The problems of Newcastle Gateshead may call for more drastic treatment than a 12-step programme but, with money coming in and the centre already turning into a cultural and economic destination, the city is well and truly on the wagon. In 10 years' time, says one of Boaden's colleagues, he hopes he will be able to "show you Newcastle's population back up to reasonable levels and people all with decent homes to live in and jobs to do, in a really vibrant series of communities".