The redevelopment is expected to be completed by 2017
Demolition work has started at a Gosport council estate as the first phase of a £140m revamp begins.
Seven hundred new homes will be built along with a 10-storey apartment block at the Rowner estate - once named one of the worst in Britain.
Bulldozers moved in earlier to start demolition of 500 homes. The revamp is expected to be completed by 2017.
But some homeowners, who have been offered the market value of about £45,000 to move, have vowed to stay.
Resident Trish Gravestock said: "This is all I can afford, we know it's low-cost housing but that is why we are here.
"I've worked hard, made it nice inside to get a lovely home."
The estate was built by the Ministry of Defence for Royal Navy personnel and their families in the 1950s.
But it was sold to private owners and has suffered from a lack of investment.
The Rowner Regeneration Project said it was doing all it could to help re-home people.
The group said schemes like part-buy, part-rent were being offered for those unable to afford a new property.
Hazel Warwick, from the project, said: "We do understand that the houses that we are demolishing, and the ones we wish to demolish, are people's homes.
"But the homes we will be producing will be high-quality design, very energy efficient and really lovely places to live.
"We will look to support their move in order to make sure they will be happy in their new home."
Compulsory purchase orders could be used to clear the way for the redevelopment.
But the partnership behind the plan said that would be a last resort.