A MULTI-million pound government scheme to bulldoze and rebuild homes no-one wants to buy is heading for the Tees Valley, as part of a £1.3bn spending spree.

The flagship Pathfinder project is already pumping £69m into Newcastle and Gateshead, one of nine areas selected for special help because of the near-collapse of the housing market.

Deputy prime minister John Prescott announced yesterday that more struggling areas would receive cash, as part of a trebling of funding to £450m a year in 2008.

At the head of the queue is the Tees Valley, which narrowly missed out on Pathfinder status despite a University of Birmingham report highlighting the plight of its housing. The area's five local authorities - Darlington, Stockton, Hartlepool, Middlesbrough and Redcar and Cleveland - formed the Tees Valley Living partnership to push for Government help.

And £870,000 funding from the One NorthEast development agency and private sector partners paid for a revival strategy already delivered to Mr Prescott's office.

Jim Johnson, director of Tees Valley Living, said: "There are pockets of intense market collapse that are not going to come back to life of their own accord. Sudden rises in house prices won't save them, we need compulsory purchase."

Details of Mr Prescott's plans to extend assistance for so-called market renewal are expected in a five-year strategic plan, to be published in September.

Unveiling his £1.3bn boost for housing, Mr Prescott also pledged an extra 10,000 affordable rented homes a year would be built by 2008, a 50 per cent increase, to tackle homelessness.

The Neighbourhood Renewal Fund, which targets the 88 poorest local authority wards in England, including many in Merseyside, will receive an extra £525m.

And a £660m Safer And Stronger Communities fund could pay for an extra 5,000 neighbourhood wardens.