Housing secretary James Brokenshire revealed the additional funding for the bonus in a statement yesterday outlining Whitehall's provisional local government funding settlement for 2019-20.
Under the New Homes Bonus scheme, the government matches the council tax earned by local authorities from each new home built, converted or brought back into use over a set number of years.
Brokenshire's statement also said the "baseline" rate for housing growth, below which new allocations of the bonus are not paid, will stay the same at 0.4 per cent.
"This housing growth baseline provides a further incentive to local authorities to welcome housing growth and build more homes to relieve housing need," the Ministry of Housing, Communities and Local Government said.
"This strikes the right balance between supporting local authorities and ensuring they work to give more people the opportunity to have a place to call home."
A 0.4 per cent baseline growth rate was introduced in 2017 as part of a series of changes made to the New Homes Bonus scheme in recent years.
The move prompted organisations including the Local Government Association (LGA) to raise concerns about reduced payments to councils under the programme.
Former housing secretary Sajid Javid shelved a previously planned increase to the baseline rate in December 2017.
Brokenshire’s announcement received a mixed reaction from local authority groups.
Lord Porter, chairman at the LGA, said "We are pleased that the government has decided not to increase the New Homes Bonus threshold further next year which makes up a considerable part of funding for some councils, particularly shire district authorities and provided some extra funding for rural authorities."
John Fuller, chairman at the District Councils’ Network, said: "The New Homes Bonus is a powerful driver for housing growth which rewards those councils who are delivering the homes this country needs and it is right that councils are not dis-incentivised in delivering more homes," he said.
But Mike KIely, chair of the Planning Officers Society (POS), said: "Whilst POS welcomes the increased settlement, it is only a 2.9 per cent increase which will do little to plug the funding gap many councils face and will not repair the huge 40 per cent-plus cuts to funding that LPAs have experienced over recent years.
"The freezing of the New Homes Bonus threshold is also welcomed but LPAs are also waiting for the long overdue undertaking of a further 20 per cent fee increase that was first announced in the Housing White Paper in February 2017.
"Let’s hope that promise doesn’t reach its second birthday without a clear implementation commitment."
Overall, the MHCLG said the provisional local government finance settlement would increase councils’ spending power by £1.3 billion.
The settlement is subject to approval by the House of Commons and will be voted on early next year.
More details on the settlement can be found here.