Councils are focused on building new homes, but should give more attention to making the most of existing houses and flats in their area.

This is one of the findings in a new national report by public spending watchdog the Audit Commission, which says that one in three councils struggles to understand the housing market on its own doorstep.

'Building better lives', published today, finds that councils feel pressured into focusing on building brand new housing - 94% of areas have prioritised new and/or affordable housing targets in their local area agreements, but fewer than a third prioritised targets relating to their existing housing stock, despite the financial savings, environmental improvements and social benefits of doing so.

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The report finds that if all councils thought of housing more broadly they could do more to combat poverty, ill-health, educational under-achievement and help strengthen their local communities.

Chairman of the Audit Commission Michael O'Higgins said: "Councils aspire to shape the communities in their area for the better. My experience as Chairman of youth homelessness charity 'Centrepoint' has shown me that homelessness and poor housing blight the lives of those who experience them, but there are great benefits to councils taking a more strategic approach.

"In tougher times, it is all the more important that councils think strategically and creatively about housing and take their housing responsibilities seriously. This report encourages councils to do that and has good examples of councils that have made a real difference to their residents without spending large sums of money."

(CD/GK)