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Just before Christmas the Government announced an early present for town halls. There will be £1.2 billion of New Homes Bonus funding for local authorities in England in the coming financial year. It represents a big incentive for councils to encourage new homes to be built – and significantly empty homes to be brought back into use.

The latest allocations mean will bring the payments since the New Homes Bonus began in April 2011 to almost £3.4 billion. This total recognises the delivery of over 700,000 new homes plus over 100,000 long-term empty properties made habitable again.

The money is not “ring fenced” – councils are are free to use the money maintaining “front-line services and keeping council tax low”. For those who do so good for them. However to encourage the flow of funds continuing some councils have used the money with that priority in mind. In his statement, Brandon Lewis, the Housing Minister, offered some examples:

“Braintree Council have allocated £750,000 of their Bonus to affordable housing, and are investing £5 million in major infrastructure projects and projects which could stimulate housing growth, such as improvements to the A120. South Gloucestershire Council give grants to voluntary, community and social enterprise organisations and town and parish councils to support them with their projects. And Sheffield City Council have used part of their New Homes Bonus to give a £1.6 million loan, allowing the development of six housing sites totalling 500 homes to be brought forward sooner than originally planned.” 

The figures speak for themselves but there has also been an evaluation which goes into further detail about the impact of the policy. It found that almost 50 per cent of planning officers agreed the Bonus was a “powerful incentive for supporting housing growth”.

In general there has been a particularly large number of new homes in the greatest areas of housing need.

According to the Evaluation Report:

“Using the distribution of households in temporary accommodation as a measure of housing need shows that authorities within a wide commuter arc around London saw high proportions of households in temporary accommodation and also were amongst the highest positive net beneficiaries from the Bonus. Again, this was less the case for London where the highest levels of temporary accommodation were not matched by the highest positive impacts from the Bonus. However, it was the case that those authorities in the midlands and the north of England who were facing the highest negative impacts from the Bonus also had amongst the lowest proportions of households in temporary accommodation.”

So far as public opinion is concerned there seems to be support for the principle behind the policy. The 2013 British Social Attitudes survey found a big shift in public opinion towards building new homes. It also found respondents would be more supportive of new homes “if the government provided councils with more money to spend on services for each new home that is built”. 47 per cent stated that this would make them more supportive – including nine per cent who would be become “much more” supportive. Half said it would make no odds – while only three per cent said it would make them more opposed.

The latest analysis of Glenigan data, the number of planning permissions for new homes in England has now risen to 240,000 in the twelve months to September 2014.

Mr Lewis added:

“Fundamentally, the New Homes Bonus reverses the perverse situation under the last Labour Government, where councils were effectively penalised for building new homes; councils with a larger council tax base from house building found that the amount of formula grant they received from central government was reduced during the equalisation process. Indeed, the evaluation report notes that our broad local government finance reforms from the local retention of business rates have further enhanced the financial benefit from building new homes, on top of the New Homes Bonus. By contrast, by opposing the New Homes Bonus, I observe that HM Opposition are still wedded to a policy position where councils which build homes would be penalised.”

Certainly Labour’s Lyons Review which came out in October was very sniffy about it – the report was much more in tune with the Soviet-style central planning approach than that of trust the people localism.

So would a Labour Government retain the New Homes Bonus? I suspect not. Their approach is that new housing is irrelevant unless it is “affordable” – missing the point that constraining the supply of housing will make it less and less affordable. Also the New Homes Bonus varies the level of reward according to the Council Tax band the property is in. That is more flexible than a target for “housing units” – which encourages councils to offer hideous rabbit hutches.

The good news for Labour is that most people are unaware that the New Homes Bonus exists. Councils like to keep quiet about it – as they wish to stress how tight the Government is being with funding. Acknowledging this vast and growing source of money would distract from their key focus on whinging.

Yet if we go through the General Election campaign without Labour being challenged on the matter it would be an easy spending cut for Ed Miliband to introduce. That would really give council finance officers something to complain about.

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