Politicians from all sides, house-builders and campaigners have raised serious concerns that the New Homes Bonus (NHB) will penalise the North, provide little incentive to build new homes and encourage the wrong kind of housing.
On April 4, housing minister Grant Shapps announced NHB allocations to local authorities worth £250m
The bonus rewards councils for the number of net additional homes built during the previous financial year.
The government pays the average council tax rate for that home for six years after it has been built.
A home in band D would generate £9,000 in bonuses,
Thirty six per cent or £350 extra is available each year for each extra social rented home built.
The government is providing £1bn for the scheme from 2011 - 2014.
Any extra funding will have to come from councils’ formula grant.
The scheme will be funded entirely from formula grant from 2014.
Opposition politicians are concerned that the system will favour councils which build higher-value homes and penalise councils in the North and Midlands where demand for housing is low and where most of the homes built are smaller houses or flats in lower council tax bands.
Shadow housing minister, Alison Seabeck, called it “expensive, ineffective and unfair”, she claimed it would only support an additional 14,000 homes.
Ms Seabeck said that Richmondshire in Yorkshire, where Foreign Secretary William Hague has his constituency, received £6,272 per home, while Scarborough, a borough with high levels of deprivation and lower housing demand, got just £294.
She believed that the scheme would encourage the development of larger properties on greenfield sites.
Kate Houghton, planning officer at the Campaign to Protect Rural England (CPRE), said: “We would have supported bonus payments for development on brownfield land which meet standards of density and sustainability.
“But under this scheme authorities will get the same funding for poor-quality greenfield sites as they would for schemes that are better thought through on brownfield land.
“There are lots of councils struggling for cash and there may be a temptation for councils to approve applications which might otherwise have been deemed un-acceptable.”
Abigail Davies, assistant director of policy and practice at the Chartered Institute of Housing said that Whitehall was sending mixed messages about how the money should be spent.
“Government is saying you can do what you like with it but the Department for Communities and Local Government (DCLG) is saying it has to go on affordable rents,” she said.
“The wealthier regions are getting more per capita than those who are not as economically buoyant.
The highest per capita award is in London,” she said.
Labour MP Graham Jones, who represents the northern constituency of Haslingden and Hyndburn, shares these concerns.
“If we look at individual district councils the losers fall into two categories either the super wealthym who do not want new housebuilding in their borough, or the poorest, where developers don’t want to build,” he said.
He released figures that suggest Knowsley Council could claw back five pence for every pound lost in formula grant and Gateshead and Scarborough Councils would recoup seven pence.
“This policy was drawn up by the South for the South.
“It was drawn up to meet the problems of under-supply.
The North is over supplied so this policy fails to deal with the oversupply of housing in deprived areas,” said Mr Jones.
County councils will take a 20 per cent share of the New Homes Bonus in spite of the fact that they have no responsibility for planning matters.
Mr Jones was worried that county councils in areas of low housing demand could have funding taken from them forcing them to cut funding for services such as social care or education.
Ms Houghton said the CPRE had obtained a legal opinion suggesting the New Homes Bonus could be unlawful as funding from it will not have to be spent within the locality in which the homes are being built.
She believed this could “unduly influence planning decisions”.
“If a planning authority is made up of 6 towns and one of them develops 1,000 homes does that mean the New Homes Bonus will be spent in that town or elsewhere”, added Mr Jones.
He wants housing policies to take account of land values and taxation as well as supply.
Councils in the South say the government is not offering enough money to make new homes attractive to developers or communities.
In December, Dr Andrew Povey, Tory leader of Surrey County Council and chair of South East Strategic Leaders (SESL), which brings together 21 councils in the South East of England, wrote to the DCLG arguing that that the NHB would not provide “enough of an incentive to communities for them to welcome development”.
He said the NHB “will be more effective if it represents additional funding over and above existing sources of revenue.
Top-slicing’ councils’ formula grant to fund tax breaks will result in reduced spending on infrastructure and services for residents”.
SESL also argued for the removal of the 20-80 split in favour of district and borough councils, for funding to be directed towards a planned programme of community priorities and for the bonus to be based on local rather than national council tax rates.
Cameron Watt, head of neighbourhoods at the National Housing Federation, which represents England’s housing associations, said: “Our concerns are like the rest of the development industry, the amount of money on offer from the bonuses is not enough to motivate councils to build significant numbers of new homes.”
“The New Homes Bonus will ensure for the first time that local people see the benefits of bringing new housing to their area so developments can go ahead with their backing rather than in the teeth of their opposition” she said.
She said the NHB was fully funded in the first year with three of the five top earners in the North and Midlands.
She added that ministers had protected deprived areas in the local government ginance settlement with a transition grant of £96 million next year to limit reductions for those most dependent on government grant.
This article was published in the June 2011 edition of Local Government News magazine.
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