Services such as sewage and policing may be cut off to force people out of desolate areas where houses cost as little as £100

Fifty years ago, Detroit was home to almost 2 million people. Today, many of the once bustling, car clogged streets of the motor city are largely abandoned. The population is less than half what it was. One in five houses is empty, and the crisis has only deepened with the mass foreclosures of recent years.

Now the city authorities, faced with talk of bankruptcy, plan to downsize Detroit by cutting off services, such as policing and sewerage, to large parts of the blighted metropolis in an effort to pressure residents to move to core neighbourhoods of a smaller city.

In some parts of Detroit, 80% of housing is empty amid widespread unemployment. Many have simply abandoned properties now worth a fraction of the mortgages on them.

Property prices have collapsed to the point where houses can be had for $100, although the average price is $7,500 (£5,000). The city council gives homes away to those prepared to pay the outstanding property taxes.

The mayor of Detroit, Dave Bing, said that his administration cannot afford to go on providing services such as schools, firefighters, buses and rubbish collection to large areas of the city where the population has dropped sharply and fewer people paying property taxes has left a $300m hole in the budget.

Bing told the Detroit Free Press that no one will be forced to move but those who remain outside of designated parts of the city "need to understand that they're not going to get the kind of services they require".

"They are much better off moving into a more dense area so that we can provide them with the services they need: that would be water, sewer, lighting, public safety - all of that," Bing said. "We think that getting our city to be more dense with its population is the right route."

Bing said that next year he will launch a plan to encourage people to concentrate themselves in about nine neighbourhoods that account for two-thirds of Detroit. Houses in the remaining one third, about 45 square miles, are eventually likely to be bulldozed to make way for new projects such as urban farms.

The city administration is expected to announce which neighbourhoods are to form the core of a revived Detroit in the spring but they will include those areas of the city which are still relatively well populated but losing residents.

"We want to make sure that, before those neighbourhoods deteriorate much more, we give them support," Bing said.

The move was welcomed by John George, who heads a group, Blight Busters, which has revitalised communities by rehabilitating abandoned houses for the very poor.

"I think it's a brilliant idea. Detroit needs to be leaner and greener and we need to right size the city to match the population as well as the budget," he said.

George said that although residents of large parts of Detroit will be pressured to move by the reduction in services, they should see it as an opportunity.

"There's an opportunity here now the housing bubble has burst. In the city of Detroit in just about any solid neighbourhood, you can buy a two, three-bedroom brick house for $15,000. There's really an opportunity to move out of shacks, substandard housing, and to move in to more of a substantial home," he said.

"I think that people who do their homework and don't let fear engulf them should look at this as an opportunity to move from a decrepit, blighted community in to one that is healthy, clean, safe, affordable."

Still under debate is what to do with the areas of Detroit that the mayor would like to empty out. One plan under discussion is to bulldoze the housing and establish a 2,000-acre farm in one neighbourhood.

George said that urban farms could transform Detroit.

"We should dismantle, deconstruct those areas and turn them over to urban farms where we are tilling a thousand or fifteen hundred acres and we are growing fresh fruit, fresh vegetables and creating jobs in canning and shipping and packaging. We could have half a dozen of those farms spread out across the city because the city unfortunately lacks quality supermarkets. It's really a fresh fruit desert in many ways.

"There's no reason why this land when it is cleared cannot be ploughed and be an asset to the community."