The New Homes Bonus was introduced in 2011 in a bid to incentivise local authorities to encourage housing growth. Under the scheme, the government provides local authorities with a grant for each new build home equivalent to the council tax raised on the property for six years.
The Department for Communities and Local Government is now consulting on plans to update the scheme, including proposals to withhold some or all of the bonus from local authorities that have not produced a local plan.
The consultation document said: "The government’s preferred option is that from 2017/18 onwards, local authorities who have not submitted a local plan prepared under the 2004 Act should not receive new New Homes Bonus allocations for the years for which that remains the case. Their legacy payments relating to allocations in previous years would be unaffected.
"An alternative would be for local authorities to receive a set percentage (50 per cent) of the bonus allocation where they have published a local plan but not yet submitted it to the secretary of state for examination. This approach would recognise progress against the different stages in the plan-making process."
The government is also considering reducing the bonus in circumstances where planning permission for a new development has been granted at appeal.
It is consulting on whether to reduce New Homes Bonus payments by 50 per cent or 100 per cent where homes are allowed on appeal, but added that it was "interested in views on other percentage reductions that could be applied". The adjustment would be applied to all six years of the incentive payment, it added.
Other proposed changes include reducing the number of years the bonus is paid from six to four. It said this was the preferred option, although it added that it is considering whether to reduce payments to three or two years.
The consultation runs for 12 weeks and can be found here.