Brighton's low-cost housing problem is a major barrier to its future economic prosperity, a report has claimed.

The authors of Brighton And Hove: Barriers To Further Economic Development say the city has become a victim of its own success.

As higher income households move in, firms are finding it increasingly difficult to attract lower-paid workers, the report concludes.

This problem is particularly serious in the hotel, conference and catering sectors, where competition from other resorts is fierce.

Brighton's large private rented sector makes the city attractive to graduates and those looking for short-term work.

But because of spiralling house prices and a lack of big business, the city is failing to retain workers as they gain more skills and experience.

This is having a knock-on effect on public services and the cost of training and recruiting, leading to more use of agency staff.

Professor Christine Whitehead, one of the report's authors, said:

"Brighton is great for getting businesses started but not great for the business of making money."

At a Brighton and Hove Economic Partnership think-tank, she said local authorities should "go with the grain" rather than attempt to influence the market.

Better use of the city's housing stock should be made, including more loft conversions and redevelopment of above-shop property.

Because of physical restrictions, not enough homes could be built in Brighton and Hove to solve the housing dilemma.

Instead, access to more low-cost housing could be improved by improving rail links along the coast to cheaper areas like Hastings and Eastbourne.

At the same time, employers could introduce more flexible working to allow people to use public transport more easily and make loans available for workers to spend on housing.

Friday March 05, 2004