The #120 million Birmingham Sandwell Urban Living project, announced by Deputy Prime Minister John Prescott last year, aims to rejuvenate or create more than 10,000 homes in some of the most deprived wards in the West Midlands.
While no Government money is being ploughed into the Cape Hill brewery redevelopment, it is regarded as a key "catalyst" for the scheme.
According to an Urban Living report to the House of Commons last year, it would provide a "step change in housing design, quality and sustainability in the area".
Yet, having reviewed the project, Cabe - the Government's architecture watchdog - said the scheme failed in eight of the 11 benchmarks.
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In the words of the panel of noted architects and planners, it fails to: n make good design a priority;
* exploit the potential of the high profile Cape Hill Brewery frontage;
* respond to the existing qualities of the site; n create a vibrant, legible environment of a human scale; n provide a safe and attractive public realm;
* provide good quality housing to meet a range of needs; n integrate with the surrounding townscape;
* contribute positively to local character.
The Urban Living scheme itself received #50 million Government funding when it was announced last year, to be complemented by an extra # 70.5 million from local authority and private partners.
The criticisms add to concerns from conservation groups over the environmental impact of the scheme and local anger about the loss of the old M&B brewery.
In spite of the Cabe comments, Sandwell Council's cabinet member for regeneration and transport, Councillor Bob Badham, maintained the scheme would be a "major boost" for the area and create a sustainable development providing a wide range of housing on a derelict industrial site.
He said: "When in 2000 it became clear the brewery site would become available, Sandwell Council was quick to respond and see the benefits a major residential site would bring to the area.
"Sandwell Council in allocating the site for housing has made clear from the outset it expects the highest standard of design on the brewery site."
Coun Badham said it represented a "key gateway" to the borough and is the first major development in the Urban Living project.
He stressed the council and it partners were "keen to see design quality on this site that exceeds that which it has previously been able to secure in the borough".
The Cabe report, Coun Badham said, was based on earlier plans. He added: "We have a commitment in Sandwell to securing the best possible urban design possible and we will continue to work with Cabe to see if we can accommodate their ideas, as we have done in the past."
A spokeswoman for Birmingham City Council was keen to stress that difference and the fact the Birmingham section was not within the "pathfinder" area.
She said: "We have negotiated significant improvements to the scheme with the support of Cabe, who have been complimentary about our efforts to ensure that the best possible scheme is secured."
