THE service offered to people with housing problems in an area of Cleveland needs major improvement, according to a Government report.

But Redcar and Cleveland Borough Council will today hit back by announcing details of a £1m temporary accommodation project.

The authority only received one star out of three for its performance in accommodating the homeless and others with housing problems.

An Audit Commission report, to be published today but already seen by The Northern Echo, said the service is fair but has "uncertain prospects for improvement".

The Housing Inspectorate, working for the commission, said that, although staff were customer-focused, the council made extensive use of bed and breakfast premises as temporary accommodation and some of this was of poor quality.

Nick Atkin, acting lead housing inspector, said: "A number of issues must now be addressed and the use of bed and breakfast accommodation must be reduced."

The inspectors made a number of recommendations, including extending the range of temporary accommodation for homeless people, phasing out the use of inadequate bed and breakfast premises and researching the problem of hidden homelessness.

However, the council hit back by announcing its £1m plan. The authority will work with the Endeavour Housing Association on the scheme funded by the Housing Corporation. Endeavour will buy a number of properties, which will be offered to people with housing problems. The council will link-up with Shelter to offer better advice next year.

"We welcome the audit report as we were already addressing the key issues," said Councillor Brian Hogg, lead member for the environment.

More than 1,000 applications from homeless people are received each year by the council and in 2001 to 2002, 45 per cent of these were accepted as being homeless.