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House Building

Volume 589: debated on Tuesday 16 December 2014

New homes bonus allocations

My Department is announcing today £1.2 billion of provisional new homes bonus funding for local authorities in England. The new homes bonus rewards the delivery of additional homes and is a powerful, simple and transparent incentive for housing growth.

The bonus ensures that local authorities who promote and welcome growth can share in its economic benefits, and build the communities in which people want to live and work. Councils are free to spend the bonus as they choose, including on front-line services and keeping council tax low.

The bonus is based on the council tax of additional homes—net of demolitions—and long-term empty homes brought back into use in the 12-month qualifying period, with an additional premium for affordable homes.

These allocations bring the total amount of funding awarded under the new homes bonus since it began in April 2011 to almost £3.4 billion. This total recognises delivery of over 700,000 homes, plus over 100,000 long-term empty properties brought back into use. The increase for 2015-16 relates to 154,000 homes and 10,000 long-term empty properties brought back into use. The affordable homes premium is £15 million in respect of 42,790 affordable homes.

In keeping with our determination to protect those authorities who suffered from flooding last winter, we have ensured that any properties which have become long-term empty as a result of those floods will not be penalised by the bonus.

In London, boroughs will pool a proportion of their 2015-16 bonus allocation to the London Enterprise Panel, the local enterprise partnership for London. Pooled funds will be spent in borough areas in support of London growth deal priorities.

There are many good examples of local authorities using the bonus in a variety of ways. For example, Braintree council has allocated £750,000 of its bonus to affordable housing, and is investing £5 million in major infrastructure projects and projects which could stimulate housing growth, such as improvements to the A120. South Gloucestershire council gives grants to voluntary, community and social enterprise organisations and town and parish councils to support them with their projects. And Sheffield city council has used part of its 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. Many other councils are simply using the funding to support front-line services and keep council tax down—there is no prescriptive approach set by Whitehall.

Local authorities will have until 14 January 2015 to make representations on their provisional allocations. The Department has written to local authorities with details for making representations on their authority’s provisional allocations. Final allocations are due later in the new year.

The incentive of the new homes bonus is complemented by the local retention of business rates and the community infrastructure levy, to ensure that local communities can share the benefits of new development.

New homes bonus evaluation

Alongside the allocations, my Department is also publishing today an evaluation report on the new homes bonus to date. It considers the effect of the bonus on the attitudes and behaviours of key figures, the financial impact of the bonus on local authorities, how bonus receipts are being used and other issues. The evaluation finds that

Almost 50% of planning officers agreed the bonus was a powerful incentive for supporting housing growth.

The bonus is seen to be delivering to its stated principles of being simple, transparent and flexible.

In 2014-15, 75% of local authorities are net gainers from the new homes bonus policy.

The new homes bonus is largely matching the distribution of housing need.

The policy is particularly helping to reduce the number of empty homes.

It has strengthened the links between housing, planning and finance for councils.

The bonus is contributing to a more strategic and co-ordinated approach to housing provision within authorities and is one of a number of factors encouraging and supporting a more proactive approach to house building.

The policy was supporting more positive attitudes towards new homes. The financial incentive and positive impact on attitudes is expected to further rise in time as the policy works it way through local plan-making.

Notwithstanding, the evaluation also found evidence that many local authorities could go further in raising awareness of the bonus within their communities, and communicating what activities the bonus is being spent on. In response to this we will set out proposals for improving the transparency of new homes bonus payments and usage early in the new year. I would like to place on record my thanks to the external technical advisory group set up to help inform the work of the review.

In addition to the evaluation we are publishing today, there have been several other expressions of support for the bonus from the local government sector itself. The District Councils’ Network has said that, “New Homes Bonus has been effective at incentivising growth and housing delivery” and “Districts have used this to support communities, invest in regeneration and keep council tax low”. The annual PwC survey of local authority chief executives and leaders found the bonus was the most popular government initiative with 59% of respondents saying it had had a positive impact.

According to our latest analysis of Glenigan data, the number of planning permissions for new homes in England has now risen to 240,000 in the 12 months to September 2014—showing that our locally-led planning system and incentives like the new homes bonus are working well.

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.

Starter homes

Yesterday, the Prime Minister announced a new starter homes scheme which will free up the planning system to deliver more low-cost, high-quality homes for first time buyers without burdening the taxpayer.

The new starter homes exception site planning policy will enable starter homes to be built on underused or unviable brownfield sites that would not otherwise be released for housing, on both public and private sector land. Starter homes will be available to first time buyers under 40 years old at a minimum 20% below open market value.

My Department has now launched a consultation document to support the announcement, and take forward this new policy which will deliver more homes for first-time buyers, as part of our broader package of programmes to support local house building.

Details of the associated documents with these publications, including a breakdown of local allocations, have been placed in the Library of the House.