Excavators have moved in to pull down the 11-storey Westmorland Court in Hebburn.
The high-rise building, which consisted of 133 flats, would have required millions of pounds of investment to bring it up to Decent Homes standard.
A single-storey section of the building which housed the concierge and security office is being demolished first ahead of scaffolding being put up and work beginning on the main block.
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Coun Allan West, lead member for housing at South Tyneside Council, said: “Demolition starting marks a major milestone in the regeneration of Hebburn town centre.
“The block was built in the ‘70s and the design and structure was very outdated.
“Bringing it up to standard would have run into millions of pounds.
“Providing modern, good-quality housing for our residents is one of our priorities and these properties simply no longer made the grade.”
The council’s cabinet made the decision in 2014 to relocate the 126 tenants then living in the building.
Contractor MGL Group is carrying out the work, which is expected to take about eight months.
Once the block is demolished, the site will be soiled, seeded and maintained, before being redeveloped as part of the regeneration of the town centre.
Hebburn North councillor Richard Porthouse said: “We’ve already seen huge change in Hebburn with the construction of Hebburn Central, which in turn has generated private sector investment in the shopping centre.
“The demolition of Westmorland Court represents another step forward, and we are looking forward to seeing what comes in its place.”