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

However, a report published today 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.

Pathfinder schemes 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 from the MP's claims that the scheme 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 £2.2 billion 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."