The credit crunch has derailed government plans to use housebuilding as a means of regenerating some of England's most vulnerable urban locations.

The government has committed £2.2bn between 2002 and 2011 to England's 11 Pathfinders, struggling areas of the north and Midlands with some of the country's oldest terraced housing. But the national decline in mortgage availability and property sales mean housebuilding in these areas looks set to halve for each of the coming two years.