YOUNGSTOWN, Ohio (CNNMoney.com) -- Youngstown, Ohio, has seen its population shrink by more than half over the past 40 years, leaving behind huge swaths of empty homes, streets and neighborhoods.

Now, in a radical move, the city - which has suffered since the steel industry left town and jobs dried up - is bulldozing abandoned buildings, tearing up blighted streets and converting entire blocks into open green spaces. More than 1,000 structures have been demolished so far.

Under the initiative, dubbed Plan 2010, city officials are also monitoring thinly-populated blocks. When only one or two occupied homes remain, the city offers incentives - up to $50,000 in grants - for those home owners to move, so that the entire area can be razed. The city will save by cutting back on services like garbage pick-ups and street lighting in deserted areas.

"When I grew up in the 1950s, the city was at its peak," said Father Ed Noga, who heads St. Patrick's on Youngstown's South Side. "There were kids everywhere and everyone converged on downtown. You went to eat, to shop and to go to the movies."

Today, downtown is positively sleepy and even somewhat derelict. Residents have to drive out of town to shop for clothes or housewares. And while foreclosures have long been a scourge in this city, they have recently skyrocketed along with the rest of the country, up 178% in February from a year ago.

"Abandoned houses here are like rainfall in the spring," said Mayor Jay Williams, "That has gone on for decades."

Growth strategy failed

For a while, Youngstown, with its population at just over 80,000, hoped to return to its boomtown roots, when 165,000 residents called it home.

"We long pursued a policy of growth," said the city's energetic young mayor. "We went after all these things that would make Youngstown a city of 150,000 again."

There were some harebrained schemes.

"A blimp factory was going to put the city back on the map," Williams said. "That represents a whole lot of the promises made and broken. They sound ridiculous now. President Clinton promised a defense facility employing 5,000. We were waiting for a savior."

They never got one. But now, Youngstown's infrastructure-paring strategy may yet become a model for other Rust-Belt cities that must recreate themselves after years of decline.

Already, delegations from smaller, post-industrial cities like Flint, Mich.; Wheeling, W.Va.; and Dayton, Ohio, have come to Youngstown to study the plan.

"We're one of the first cities of significant size in the United States to embrace shrinkage," said Williams.

It's an odd way to pioneer. "The American narrative always includes growth," said Hunter Morrison, Director of the Center for Urban and Regional Studies at Youngstown State University, which works closely with the city on plan 2010's implementation. "No one wants to talk about shrinkage. That's too threatening to politicians, civic boosters and Chambers of Commerce."

The demolitions can yield stark contrasts. In many neighborhoods, blocks have more empty lots than buildings.

Glory days

Even wealthy neighborhoods, like the North Side historic district, where mill owners and upper management once congregated, have eyesores.

On one corner, there sits a beautifully maintained seven-bedroom Tudor, yet down a side street, a wood-framed colonial is boarded up. Next door, an empty Victorian sits moldering, the wood of its window frames scorched. Lines of old hedges mark lot boundaries where once-proud homes stood.

Youngstown used to be the nation's third-largest steel producer; its mill workers earned among the highest factory wages in America. Demand for their services was strong.

"You could graduate from high school one day and start work in the mills the next," said Noga.

That changed on Sept. 19, 1977 - Black Monday - when Youngstown Sheet and Tube abruptly closed its doors.

"Five thousand people showed up for work one day and were turned away," said Phil Kidd, Downtown Director of Events and Special Projects for the city.

"The city lost its heart and soul," said Mayor Williams.

Within years, all the mills vanished. Noga recalls seeing idled workers watching as one of the oldest blast furnaces in the valley was dynamited. "I saw these hard men, shot-and-a-beer guys, standing there crying," he said.

The city's East Side stands as a totem to Youngstown's glory days. This mostly empty land was readied for development just after World War II - when streets, water and sewer service, signs and utility poles were installed.

But growth never came, and that makes for some strange city streetscapes today. There are few occupied homes and unkempt woodlands have taken over. There's at least one 10-acre farm and many other large fields.

Some dead-end streets are already uninhabitated and torn up, their outlets blocked with concrete barriers. Many roads are pitted and potholed; drivers have to slalom slowly through or face axle-busting jolts. Lonely water hydrants look woefully out of place sitting on the sides of rural-looking roads.

Today, a new spirit seems to have taken hold. Phil Kidd started the Web site Defend Youngstown, and said he hears from tons of former residents who would like to return.

"They call and email from all over the United States with suggestions on how to help," he said.

A fresh start

"I'm very nervous to have all that space," said Elsa Higby, the founder of Grow Youngstown, which promotes produce gardening and farmers markets. "I'm used to living in 460 square feet."

Ideally, all this energy surrounding 2010 will help turn the city around. It does have a lot going for it, including Youngstown State University, which attracts creative-class types like artists and writers and other intellectuals, as well as museums and an excellent public library.

The cheap residential and commercial real estate can be a draw. Start-up companies thrive on low overhead, and employees can easily find housing just minutes from work.

At the very least, the 2010 plan has changed residents' perspective, said Hunter Morrison. "It's getting us to think about where we're going into the future, rather than where we've been in the past."