The regeneration of Blackpool is being held back by the large numbers of benefit claimants moving to the seaside to sign on for income support and other allowances, a report due to be published in the autumn will reveal.
The report, commissioned by government agency English Partnerships (EP) and being written by property consultancy GVA Grimley, will call for "significant intervention" by the Government into the Lancashire town.
The disproportionately high number of transient claimants passing through Blackpool to seek benefits by the sea is falsely inflating house prices due to competitive landlords. Consequently, working families are being forced to seek out cheaper stock elsewhere.
Dave Chilton, area director for Greater Manchester, Lancashire and Cumbria at EP, said: "Some money should be geared up to address this massive problem. There are 3,000 houses of multiple occupancy (HMOs) in Blackpool, which is vastly disproportionate to other coastal areas.
"Former guest houses are now turning themselves into rented houses for the benefit tourists, all of which is impacting on the local economy, on employment, and the health and education of the town's population."
The report's researchers found 42% of housing was privately rented in an area labelled 'inner Blackpool', running from South Beach to North Beach and taking in the heart of the town down to the waterfront.
The North West average is 8.5% privately rented housing and the UK average 9.9%. Blackpool as a whole has a private rented rate of 18%. The figures strip out housing associations, local authority stock and registered social landlords.
Chilton added: "Many people are relocating from Scotland and have particularly strong memories of going on holiday to Blackpool. It seems it remains a focus for a lot of people."
Other bodies working on finding a strategy to tackle the blight of benefit tourism include urban regeneration company ReBlackpool and Blackpool Council.
One of the report's authors, Gerry Hughes, head of planning, development and regeneration at GVA Grimley in the North West, said: "We expect to be going to government with a strategy in October.
"Then once we have got the buy-in to the broad approach and understanding of where funding might come from, we can go to the community to consult them on the plans.
"This will probably require quite significant public intervention given the scale of the problem."
Hughes added: "There is over-crowding and house prices which are inflated by demand from private landlords to create more HMOs. This has caused a seriously dysfunctional market, not because of the low demand that affects other areas but because of benefit tourism."
Falling conventional tourism is not helping as whole streets of guest houses give way to social security tenants
Blackpool was not granted Housing Market Renewal Initiative, or Pathfinder, status in the first round of allocations but may consider bidding for it if there is a second round. The policy is said to be under review since Gordon Brown took power.
Chilton declined to discuss specific options for solutions ahead of the report's publication.
He said talks with Hazel Blears' Department for Communities and Local Government are expected to make the economic case for change rather than focusing solely on housing issues.
The timing may be just right for Blackpool to get ministerial backing. At the start of August, a separate action plan for the development of Blackpool was delivered to Government by the members of the new Blackpool Task Force.
The manifesto called for measures aimed at encouraging £2bn in private sector investment between now and 2017, creating about 11,000 net additional jobs, providing 2,000 new homes and training 2,500 new local Higher Education students.
The Task Force was formed in March 2007 following a request from Government to look into the long-term regeneration plans for Blackpool, in the wake of Blackpool's disappointment in not being granted a regional casino licence. Blackpool had hoped to use the casino to build on ambitious plans that were being developed locally and to attract substantial private sector investment to the town.
The Task Force was led by the North West Development Agency (NWDA) and involved Blackpool Council, Government Office for the North West, ReBlackpool and EP.