New Homes Bonuses – Will it Succeed or Fail?

publication date: Feb 22, 2011
author/source: Kate Faulkner, Property Expert and Author of Which? Property Books

New Homes Bonuses – Will it Succeed or Fail?

As part of the localism bill, aimed to give local communities more control over the number of properties built in their area, all new homes built will now come with a ‘incentive’ or ‘bonus’. The bonus is expected to be paid to the local authority to help re-invest in the local community.

According to the Communities website from April 2011, the New Homes Bonus will be paid to local authorities and has been based on “matching the additional council tax raised for new homes and properties brought back into use”. There will also be a further bonus for building 'affordable homes'. The bonus will be for the next six years.

The amounts that Communities have set aside appears, on the surface, to be a lot of money. “Almost £1 billion....including nearly £200 million in 2011-12 in year 1 and £250 million for each of the following three years” is on offer. According to the government, “this will be a simple, powerful, transparent and permanent feature of the local government finance system” and “will ensure that the economic benefits of growth are returned to the local area”.

However, there are already grave doubts over whether the scheme will work at all. According to the NHBC, developers are not planning to increase the number of homes they are producing by much over the next two years, bonus or no bonus!

Looking at the detail of the bill, The Housebuilder calculates that the bonus scheme “works out at more than £9,000 for each Band D home over a six year period”. There is a higher incentive for affordable homes, which will be “around £11,000 for a Band D.”

However when you break this down over the 326 local authorities that exist, the share of this year’s money will be around £196 million. Again it sounds like a lot of money, but if you divide this by the number of local authorities, then it works out, on average, around £600,000 a year for each local authority. Based on this calculation, risking fighting your local neighbourhood nimbies for this much money is unlikely to be a big incentive.

Furthermore, councils ‘up north’ are claiming that homes are more likely to be built ‘down south’ with a report in the Liverpool Daily Post, “Merseyside housing cash to fund ‘new homes in South".

More problems, following the announcement are foreseen with this policy as The Campaign to Protect Rural England has indicated that to link planning decisions to financial rewards is a system that is potentially unlawful. Shaun Spiers, CPRE’s Chief Executive, says: “The final details of the New Homes Bonus are a recipe for planning chaos, with potentially grave consequences for the countryside. How can any important planning decision be considered impartial and balanced when there is a big pile of cash sitting on the table? It is little more than cash for sprawl.”

So, at this moment in time, it doesn’t appear that local communities, local authorities or developers are likely to be positively influenced by cash for new homes. If this is Grant Shapp’s only ‘big idea’ on how to deliver much needed homes to house our ever increasing new households, then just now, it isn’t looking like it’s going to succeed.


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