How changes could limit the power of building incentive scheme

Fears have been raised that plans to reform the New Homes Bonus scheme could reduce the effectiveness of the mechanism.

Homes: savings to bonus scheme being considered
Homes: savings to bonus scheme being considered

Last month, the government said it would consult on changes to the New Homes Bonus incentive scheme, under which the government matches the council tax raised on each new home for six years. In his joint Spending Review and Autumn Statement, chancellor George Osborne said that the changes would include "means of sharpening the incentive to reward communities for additional homes and reducing the length of payments from six years to four years". This, the document says, "will include a preferred option for savings of at least £800 million, which can be used for social care."

Asked for further detail on these measures, a Department for Communities and Local Government (DCLG) spokeswoman could only tell Planning that the consultation would happen "shortly" and that local government allocations for 2016/17 would "not be affected by any changes."

So what is meant by a "sharpening up" of the scheme? Jim Ward, a research director at property firm Savills, believes the intention will be to give less money to those authorities not hitting a particular threshold, and that payment will be "biased towards who are building lots of homes".

Steve Ingram, strategic director, development and growth at South Kesteven District Council, and junior vice-president of the Planning Officers Society, predicts that in two-tier areas, more money could go to the county councils. At the moment, if a district council qualified for New Homes Bonus money, 20 per cent of the cash goes to the relevant county council. But Ingram believes that the government wants to change this "in favour of the county to meet the social care and other budgets." This, he argues, could "cause problems because it will become very opaque and people will not understand the relationship between growth and the bonus".

Andrew Whitaker, planning director at the House Builders Federation (HBF), foresees that some local authorities will "not to be paid the bonus on homes which they refused and were won at appeal". This, he adds, is one of the changes the HBF has proposed to DCLG "because we see it as a way to make the system fairer."

Overall, Ingram and Whitaker agree, the bonus scheme has been reasonably successful in encouraging local authorities to build more houses. However, Ingram adds that it is difficult to assess the success because some councils "might have been pro-growth anyway" and other councils are "still not perceived as open to sustainable growth".

But Ward is more skeptical. He describes the scheme’s effectiveness as "underwhelming" and says that, after speaking to planners and housebuilders, his sense was that the bonus scheme has not played a major role in incentivising councils to approve more housebuilding.

Ingram argues that reducing the number of years the bonus is paid out to four will diminish the scheme’s attractiveness, and Stephen Brown, director of the District Councils Network, says it "seems very strange" for the government to announce its intention of building one million new homes by 2020, "then to remove the incentive."

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