Mabgate is an industrial area on the northeast fringes of Leeds city centre. On this quiet February afternoon, there are no cars about, just a lone woman battling against Storm Doris, as winds blow litter up and down the street. A pub that once thronged with local workers has been converted to flats. It all seems unremarkable.

Hidden away in this unglamorous former red light district, behind closed doors and inside a dense cluster of 19th-century woollen mills, are arts operations like printers, writers, designers, studios and photographers, mixed in with independent mechanics and the odd Floors4U store.

Less than 500 meters away, on the other side of some grimy tower blocks and the A64 flyover, things are very different. There's a bustling new multimillion-pound shopping centre and a John Lewis department store. It's a looming reminder that the town centre is creeping outwards and could eventually transform this creative enclave into something much more commercialised.

In Mabgate, by the junction with Hope Road, is Hope House, a once handsome two-storey office building. The tenant since 2007 has been Music And Arts Production (MAP), a charity that offers arts courses for young people. It's run by Tom Smith, who in part funds it through Cosmic Slop, one of the best and most distinctive parties in the UK, which has been taking place here since New Year's Eve 2009.

The grandeur of Hope House stands out in Mabgate. It makes the building an obvious candidate to be converted into luxury flats once the money reaches this part of town. The landlord always knew this, and recently decided it was time to sell. Though Smith says the landlord is "understanding to the cause," he will sell the building for £1.5 million once the tenancy ends in 2019. Smith and his team have decided to try and raise the funds themselves, so MAP can continue to educate young people and forge closer bonds with the local community. It might seem like an insurmountable challenge, but given what they have achieved in the last ten years, it seems possible.

When I arrive, Smith unlocks a hulking chain, swings open some 20-foot-tall steel gates and leads me through a grand arch into a courtyard, then into the building. Signs of Hope House's former glory remain in the high ceilings, tiled flooring and plush cornices, but by now everything is well-worn and flaking. As he pushes open another door, a blast of warm air engulfs us and we enter a music production classroom. Boys and girls aged between 11 and 16 are slouched back on chairs in front of a circle of computers. It's not a fancy space but it's a vital one: these children have been removed from school, some for a day, some on a long-term basis, and most have barriers to learning—criminal involvement, or emotional or behavioural issues.

Paul Edmeade, one of two full-time MAP tutors along with an education manager and a functional skills supporter, stands up and offers his hand with a smile. We head next door to the larger art room, but not before one of the boys waits until I'm the only one looking at him and then proudly flips the bird at me. I explain why I'm laughing as we head into the art room.

"I wouldn't have it any other way," Smith jokes, himself dressed down, much like the students, in a big black parka, loose tracksuit bottoms and Nike Air Max. "These kids really do want to be here, though, otherwise this wouldn't work."

Smith started the centre with Kat Soutar and Charlie Stobbart in February 2008, and had essential help renovating the building from Nic Vale, who has been the events manager for every party since day one. It's a structured but relaxed environment for 14 young people who, for various reasons, struggle in mainstream education. They leave with an Edexcel BTEC in Creative Media and Art and Design, and some enjoy it so much they return to volunteer. In order to accommodate them, MAP has begun offering apprenticeships. This is one part of a bold plan for Hope House's future, should they succeed in buying it.

MAP started as a soundsystem. Smith, now 35, blistered his hands while building it in his bedroom, without any power tools, aged 21. He used some of a £45,000 inheritance from his grandfather to source the parts, and through François K's Wave Music forum struck up a relationship with Scott Fitlin, who used to run Eldorado Bumper Cars in Brooklyn and was a big fan of old disco soundsystems. Back then, the pound was strong against the dollar, and audiophile pursuits were less en vogue than they are now, so, for a reasonable price, Smith used eBay to source rotary mixers, high-end amps and everything he needed to build the system.

Nowadays the system is quietly spoken about as one of the best in Europe, with Floating Points and Motor City Drum Ensemble among its fans. Theo Parrish came to see it before a gig elsewhere in the city, and demanded Smith build him one back in Detroit (as of yet, he hasn't). For years after it was finished, though, it was in storage. The plan was to start a club that used the system, as well as Stobbart's venue management skills, for parties at the weekend. When trying to decide what to do with the space the rest of the week, they agreed on some sort of community project.

"We were both in youth work," Smith says, as we stand in a freezing cold vault that once stored workers' wages, then diamonds. Students can be heard misbehaving in the background. "Charlie volunteered in a school, I did some work in Armley setting up a radio project for kids, just out of general interest, so the community idea grew."

Before anything came of it, the pair went off to do other things and the system lay in storage. Smith's thoughts eventually turned back to the system, but this time it was less central to his ideas. Instead, he was motivated by social issues and the idea of community. After looking for suitable venues, they found Hope House. The soundsystem was used for a monthly party they called Cosmic Slop, with the funds channelled directly into MAP.

"It all comes from my mum," Smith says when I ask if the inspiration was his own troubles with school. "She's just really nice. She did voluntary work for the Citizens Advice Bureau. She's not even political, just someone who is very giving and humanitarian. But music also did it for me."

Smith, an earnest, articulate and dizzyingly well-informed character, checks himself. "It sounds corny, but the message in a lot of music informed me politically," he says. "One night I was listening to a Claudio Coccoluto mix with a tune that sampled Fela Kuti. I was 17 at the time, and as soon as I started listening to his stuff I got it straight away, even though my mates said it was all fucking bollocks. All this music speaks about something relevant—social, political—and it really impacted me."

Later, a degree at Leeds College Of Music got Smith into jazz, and he started going to London's Plastic People and Journey Through The Light. "For someone from a privileged, middle class, white background, you don't see things from a different point of view. Music is a fantastic communicator of ideas. We need people to be inspired in the club, to see this is worth more than just being cool, or staying up the latest, or doing the coolest drugs, or earning loads of money."

As he speaks more and more forcefully, punching his palm to reiterate each point, it's clear that passion burns strongly in Smith. He's bullish about his beliefs, which might be why some people in the city have told me they find him hard to connect with. Floating Points, though, is a big fan, and played here four times in one year, all unannounced, with no compensation except a bed at Smith's house and some home cooking. Plenty of other DJs have played unannounced, from Four Tet to Alex Nut to Mr. Scruff, and many others pop in when they are in town, all keen to check out a quietly famous party that might be among the closest things the UK has to David Mancuso's legendary Loft.

In considering the issue of privileged DJs playing rare funk, soul, jazz and Afro to other privileged kids, Smith believes intent and context is key. "I always imagine if I was an old soul guy who never got money from my art, then I see someone playing my song to 4,000 people—what is it about? If it's just that these people are getting ten grand for an hour set just to support these corporate brands, I'd be fuming. But if I came down here and saw people dancing to my music, and it was going back to support people in the community, then it doesn't matter what ethnicity they are or where they are from."

Along with every penny from Cosmic Slop—or just "Slop," as regulars lovingly call it—all of Smith's inheritance went into the charity. It took him ten years to get it back. He says he once worked out his hourly rate for the first few years of running MAP—when the two other founding partners left to have children—at around £2.50 an hour. "But in your 20s you just get on with it, don't you," he says.

The space the (roughly) monthly party is held in holds 200 people, and is more like a front room with a big curtain down one side and wooden flooring. It's used by day as a space for the students to exhibit their work, or battle it out singing bars in front of a public audience.

When I return for the party two days later, a queue is snaking down Mabgate. Some people have made the trip from Ireland, others are more local. The doors only opened half an hour ago, at 11 PM, but it's already one-in, one-out. When the people outside are told the wait could be an hour, they simply nod and say, "Fine." No one budges.

Inside, the party is popping. No one hangs on the fringes. Balloons dangle from the ceiling, and a giant anatomical heart hangs above the doorway. It was a project by the art students, and as people pass by they tug on strings that inflate and deflate the giant ventricles. Cake and fresh fruit is laid out on a table. There are boys in makeup and girls kissing wearing none. A Sikh is shifting shapes down the front. A Rastafarian moves between people aged between 18 to 50 years. It's a picture of diversity most clubs cannot claim.

The music is loud but not jarringly so. It sounds almost like a high-end home hi-fi. When I leave hours later, despite having stood right by one of the stacks, my ears don't ring in the slightest. On the decks—as at just about every party—is Mike Greenwell, a friend of Smith's since they were teenagers and a trustee of the charity since day one. He's a journalism lecturer at Nottingham University, and teaches in higher and further education, so he helps MAP with policy and helps decide which qualifications the charity should offer. Tonight he's playing back-to-back with the cult crate digger Kelvin Brown. Smith also hops on and off throughout the night—Slop is too informal for set times, even when a guest plays.

You might wonder: if the party is so popular and ultimately funds a charity, why doesn't it happen every week? "It takes real discipline," Smith says. "People say I should have gone to a bigger venue, should be doing this or that, but this is a long-haul thing. I want to be here for 50 years. Seven years in is still credible. Seven years in, we've not commercialised or commodified it. We haven't dispelled that air of mystery. I think that's important if we're going to have a culture that's worth fighting for and don't just crumble at the slightest whiff of financial gain, even if it's for charity. I could say, 'Why don't we do other events that aren't Slop?' It's not just about milking something dry until it can't function any more. That would be very easy to do. If we had a big guest every time, it'd distort it out of shape and it wouldn't have the essential thing that has kept it going."

As well as the soundsystem, the music policy at Slop is unique: there isn't one. On the Saturday I visit, there is dub, jazz, dancehall, Afrobeat and reggae, psyched-out guitar tracks, political spoken word monologues and many different changes in tempo that would usually clear the dance floor but instead just make the intimate room even more atmospheric. People dance all night long, no matter what's playing. The biggest reaction of the night arrives around 2:30 AM, as Greenwell drops Freddie Hubbard's jazz number "Red Clay." Cuts from Wiley, John Martyn and Shackleton's "Death Is Not Final" all follow.

Days later, Greenwell recounts the night. "Everyone reacted really well to whatever we played, and we're lucky in that respect. We've nurtured that music policy since day dot. It's always been eclectic in the true sense, and we play as many artists and genres and musicians as we can that we feel are saying something political or relevant for today."

During the preceding week, Smith and a new recruit, Raf Bogan, who was taken on to deal with spreading the MAP message and raise awareness of their fund raising plights, show me around the rest of the building. It's on two floors, with a vast, dingy, low-ceilinged basement. Down amongst the damp is an independent screen printing workshop. The staff are outside in the rain smoking rollies and a dog is curled up on a sofa under a blanket. There is also a dimly lit wood workshop, and the guy who runs it makes desks for the classrooms upstairs; the students used the place to make speaker cases, which they sold to Floating Points (the money, of course, went to MAP). This exchange of skills between artists, craftsmen and students is at the heart of the plans for the future, should they succeed in buying the building.

"Not many charities engage in the type of activities that we do," says Smith. "And there is a lot of advantage to the fact we deal in music, and that is seen as cool. We stand a chance of doing this, but I also want to prove it is a model for others to do the same thing; to prove artists can really achieve things if they organise their voices."

Elsewhere, there is a space with a vinyl lathe and an electronics workshop where the soundsystem gets repaired, amongst other things. There are also many derelict rooms with wood-beam ceilings, ripe for conversion into more educational facilities. When we enter one, pigeons scatter from the rafters. One wall is encrusted with years of bird shit, obscuring some Chinese characters from when the space was used as a dojo.

We go back out onto Mabgate. Further up the street, a student is leaving for the day. As Edmeade shakes his hand and sees him off, Smith stops talking. "Yo, see you later, Trey," he shouts. The kid mumbles "bye" as he shuffles off. Smith calls him a cutie under his breath, revealing a softer side I didn't see during three impassioned hours of chat.

Smith's dream is that if they buy the building and do it up in the right way, artists will move in, pay cheap rent, and in exchange spend one day a week teaching. He hopes, once MAP expands to include cooking courses, there can be an onsite cafe run by students, as well as garment printing, paper printing, woodwork, metalwork and electronics workshops. Smith wants to draw links between education for young people and creative sector business, making them relevant to one another on a day-to-day basis. In the more immediate future, from 2018 MAP will offer functional skills certificates for maths and English.

As we pass through the basement again, Bogan reaches out and mists some seedlings that are growing on racks under hydroponic lights. It's the start of a rooftop kitchen garden project that will again be a way of furthering the practical and life skills of disadvantaged MAP students.

Smith has drawn up a vast business case with a view to attracting investors, cultural figures and philanthropists. The plan is to show that a community-minded business like MAP is perfectly sustainable—and so far it has been. He doesn't want to rely on grants, funding and handouts. Instead, he's looking for investors on a grand scale combined with a groundswell of local support. He believes that one feeds the other.

"When we set up, we wanted to be a business that is fucking responsible," he roars. "How do you get respect from society at large if you are begging for help every two seconds? Does that mean progression can only occur in society from the handouts of the people who are trying to wash blood off their hands? That's not good enough."

Smith's days are filled with being a caretaker, running events, doing quality assurance on the education programme and answering to the authorities on those matters, as well as health and safety work and plenty more. He also DJs at events like Dimensions and is a semi-regular guest on NTS. The most rewarding thing about it all, though, is something else.

"18- or 19-year-olds come down and say that the party changed their perspective on things in terms of hearing the music, the message, the lyrics, seeing you don't have to have an hour of this music, then an hour of that, knowing that there is a line of continuity between Marvin Gaye and techno and Afro music and jazz. So if the plan is pulled off, Slop will have served its purpose, which is the whole point of this culture. It's not something to be consumed, it should be a driver of progression."

He smiles. His intensity drains for a moment, and he allows himself to dream of the day that his mission is completed. "And wouldn't that be nice?"