Last week, the communities secretary Sajid Javid announced that the government would introduce a new national "baseline" for housing growth, below which New Homes Bonus payments would not be made to town halls. Javid said that baseline - set at 0.4 per cent - would help "ensure the money is used to reward additional housing, rather than normal growth".
Details of how the new system would operate were first slow to emerge. But it is now clear that most authorities are set to see payments reduced from next March through a combination of the introduction of the 0.4 per cent baseline, as well a move to reduce legacy payments arising from additions to housing stock in previous years.
27 authorities are beneath the 0.4 per cent baseline
According to an analysis by Planning, 27 local authorities grew less than 0.4 per cent in the year to October 2016, which is the period the Department for Communities and Local Government (DCLG) is using as its "baseline" for housing growth (the calculation is total net additions as a percentage of stock in the previous year). These authorities include several with green belt constraints (Brentwood, Mole Valley, Gedling and Bury), coastal authorities (Poole, Hastings and Southend-on-Sea), and a number of districts in the North West (Blackburn with Darwen, Barrow-in-Furness, Stockport, Sefton, Wirral). The housing stock of two authorities - Blackburn with Darwen and North East Lincolnshire - actually shrank compared to the previous year, according to the figures.
Changes do not mean authorities will miss out entirely on funding
While the 27 authorities listed above did not achieve more than 0.4 per cent housing growth in 2015/16, this does not mean that they will miss out entirely on New Homes Bonus payments. For a start, payments for additions to the housing stock in earlier years will still be paid in 2017/18 and beyond (the bonus is paid for a six-year period for each new home, although this is being reduced - see below). This means that authorities will see New Homes Bonus payments reduced, rather than withdrawn entirely.
The DCLG has also confirmed that an affordable home "premium" of £350 per unit will continue be paid, even in instances where authorities have failed to achieve more than 0.4 per cent housing growth. Twenty-six out of the 27 authorities beneath the 0.4 per cent baseline will still receive cash from the bonus’s affordable homes premium in 2017/18, Planning’s analysis shows. Only one - Blackburn with Darwen - did not deliver any affordable housing units in 2015/16, according to the DCLG’s figures.
Double whammy: councils also hit by reduction in legacy payments for previous years’ delivery
Under the New Homes Bonus, councils have since 2011 received annual rewards based on the amount of council tax revenue raised from new or reoccupied dwellings. These "matching" payments continue for six years - in the 2016/17 financial year councils received payouts for homes added to their stock in six separate years.
But the government announced last week that it will push ahead with proposals in its consultation to reduce this period to five years, then to four. The change means a double whammy for councils in the 2017/18 financial year - not only will they not receive payouts for the first 0.4 per cent of homes they add to their housing stocks, they will also receive payments for only five years of housing additions rather than six.