Residents of the most devastated areas of New Orleans reacted angrily yesterday to a blueprint for rebuilding the city that gives them four months to prove they can bring their neighbourhoods back to life or face the prospect of their homes being turned into parks or marshland.

The first comprehensive plan for how the city should be put back together following Hurricane Katrina, unveiled by New Orleans' mayor Ray Nagin yesterday, also includes lofty plans to build a light railway system and recreate a jazz district in what was once the red-light area of the city. The multibillion dollar proposals prioritise improving hurricane defences and the elimination of a 76-mile shipping canal blamed for much of the flooding.

The blueprint, which calls for a much smaller city, estimating that just half of the 500,000 people who lived there before Hurricane Katrina will resettle in the next two years, drew loud boos and shouts of anger from residents who crowded a downtown hotel meeting room for its announcement.

"I'm ready to rebuild. I'm not going to let you take everything. I'm ready to fight to get my property together," one man shouted from the back of the room.

According to Reuters, Carolyn Parker, a resident of the ruined Lower Ninth ward, told the panel: "I don't think it's right that you try to take my property. "Over my dead body. I didn't die with Katrina."

The Bring New Orleans Back Commission was told to think big and have little regard for the cost when coming up with ideas. The blueprint is non-binding and contains many proposals that are likely to be opposed at federal and state level, as plans for rebuilding the city must also be agreed by the White House and the Louisiana Recovery Authority, the state agency in charge of disbursing billions of dollars in federal aid.

A controversial proposal that would have allowed residents to return to all parts of the city but would close within a year those neighbourhoods that did not achieve a critical mass of residents has been watered down since the New York Times reported it over the weekend.

Instead, according to the Times Picayune, a New Orleans newspaper that obtained an advance copy of the report of the land use committee, no one will be allowed to build in the most damaged areas for four months while residents meet to plan how to rebuild their neighbourhoods. Those areas that fail to attract enough people or are considered unsustainable face the prospect of compulsory purchase by the city, and are likely to be turned into parks or marshland that will double as extra flood defences.

Areas that are likely to have to prove their viability include the Lower Ninth, a predominantly African-American area that is one of the city's poorest and was devastated by the flooding. The plan to compulsorily purchase homes is likely to provoke protest, so, according to the Times Picayune, the commission suggested offering a more generous reimbursement package than has previously been suggested, with more than $12bn (£6.4bn) of the $17bn estimated rebuilding budget devoted to buying out residents in unsustainable areas.

The commission will also propose a reorganisation of the city's education system, which has been beset by low performing schools, broken facilities and corruption. Other proposals will involve making the city greener by creating cycle lanes and a commuter train line linking New Orleans to other cities along the Gulf coast.

Committee members said another part of the plan was to use tax credits to recreate Storyville, the city-backed red-light district that operated for 20 years until it was shut in 1917. But rather than bringing back the sex trade the idea is to reclaim its musical legacy by creating recording studios and a jazz museum.

"These are projects by real New Orleanians that will have real benefit," Michael Arata, the chairman of a subcommittee that looked at rebuilding the city's film and music industries, told AP.

At a glance

· The worst damaged areas that do not attract enough residents to make them viable communities to be turned into parks or marshland

· Build a $3 billion (£1.6bn) light railway system in an effort to spark redevelopment in areas of the city that were flooded

· A commuter line linking the city to Baton Rouge to the west and the Mississippi Gulf Coast to the east

· Recreate a jazz district in the former red light area

· Eliminate a 760-mile shipping canal that was a prime cause of flooding after Hurricane Katrina

· A complete reorganisation of the troubled school system