STANLEY ALLEN, a self-employed painter and decorator, bought his house in Liverpool’s Welsh Streets 18 years ago. He is still there—but few of his old neighbours are. Most of the redbrick Victorian terraced houses on his street are sealed off with metal grilles across the doors and windows, ready for demolition. “They’ve destroyed the whole community”, he says, of Liverpool’s scheme to regenerate the area by demolishing older houses. “And it used to be lovely.”

The Welsh Streets are one of the more prominent examples of the failure of the previous government’s plan to restart the housing market in several depressed cities in the north of England. Tenants were moved out and compulsory purchase orders sent to landlords. A row grew as protesters claimed that the government was subsidising private developers to knock down Britain’s industrial heritage. The programme’s defenders claimed that replacing old houses with new ones would attract young families to blighted areas, increase house prices and even cut crime.

But demolition ground to halt when, as part of the coalition government’s attempt to close the huge deficit in Britain’s public finances, the £5 billion ($8.1 billion) programme was cancelled eight years early. Liverpool council lost £130m earmarked for the scheme. Having won some money from other state funds, it will refurbish 32 of the houses in the Welsh Streets, including the birthplace of Ringo Starr, a Beatle, as well as a few hundred elsewhere in the city. More still are due to be demolished, but that is controversial. On September 19th the High Court ordered a judicial review into the use of “transitional” funding to knock down houses. Similar scenes, without the Beatles tourists, can be seen across the north of England.

After decades of relative economic decline and population loss, the north has a problem unimaginable in most of the south: too much old housing. Partly as a consequence, house prices are sharply lower in the north than in the south, even after accounting for lower average incomes. In Liverpool, the average house costs just £127,000, about a quarter of the average price in London. And the gap is growing. According to figures published on September 18th, while house prices increased by 5.7% in London over the past year, they fell by 1.3% in the North West.

Falling prices compound the problem for councils hoping to regenerate struggling inner-city areas. Banks become reluctant to hand out mortgages, which in turn deters the developers who used to renovate or rebuild crumbling houses. Construction has weakened everywhere since the beginning of the recession, but in northern cities it has collapsed. In Liverpool, net building has fallen by 85% since 2007; in Manchester, it is down by 90%.

Nick Johnson of Urban Splash, a company which redevelops dilapidated housing stock in several northern cities, says speculative investment has become less attractive not just because of the weak mortgage market but also because of cuts to government “gap funding”, which helped reduce risk for developers. Big regeneration projects have simply become unviable. Urban Splash is now focusing on smaller projects and on the rental market, where profits are lower.

Yet several councils are now coming up with innovative ideas of their own. In Stoke-on-Trent, residents can apply to buy houses acquired under the Pathfinder scheme for £1, together with loans of £30,000 to refurbish them. In Manchester, the council is building new homes on land that it owns. It has enlisted the Greater Manchester Pension Fund to pay contractors, with a promise of a share of rent and profits when the homes are sold.

Those sorts of strategies could work in Liverpool too. The new mayor of the city, Joe Anderson, says he wants to rebuild or refurbish 5,000 houses by 2016. With the city’s population now growing again, reversing decades of decline, the sooner he succeeds the better.