New Homes Bonus

A look at how the Bonus will work

Those senior citizens who have lived here all their lives will remember Groby as a small village with a quarry surrounded by farmland. They will have watched as the fields disappeared beneath the houses and new roads which came mainly as part of the post war development. The available land for housing within the village has all been developed or earmarked for development with the focus moving to the green corridor that surrounds the village and helps maintain it's separate identity from neighbouring villages. So they may be surprised to hear that despite all these new homes the Coalition Government believes that the old system of giving local authorities targets for housing completions has failed to deliver the number of houses the nation requires.

A new approach

The Government, of course, sees the bigger picture of a national shortage of housing and has decided that a new approach is required. "Dosh for dwellings," or to give it the official title, the New Homes Bonus, is the solution that has roared off the drawing board and is coming soon to a Council near you. The idea is that targets will be replaced with incentives. The scheme will provide local authorities with a New Homes Bonus, equal to the national average for the council tax band on each additional property and paid for the following six years as an 'unringfenced' grant. An interesting feature of the New Homes Bonus is that it will also reward local authorities for bringing empty homes back into use.

"The New Home Bonus will have localism at its heart," said Grant Shapps, Minister for Housing and Local Government, in the foreword to the scheme outline. " It will re-energise communities. It will encourage local politicians to lead a debate with communities about the benefits of new homes. Local authorities will be expected to work with local people to develop their housing plans in ways that meet their needs and concerns." But you can't please everyone all of the time and there are those who have concerns about the Bonus scheme.

The concerns

The National Housing Federation, which represents 1,200 not-for-profit housing associations in England, believes that the scheme will favour development in southern England and increase the possibility of a north-south divide. It has warned that the New Homes Bonus will create more executive homes in the south, but at the same time halt construction of social housing in the north of the country. This is because the Federation believes the scheme favours the construction of larger homes, and that rewards are linked to property’s potential value.

It has been reported that the Campaign to Protect Rural England, has claimed it was unlawful due to linking financial reward with approved planning of developments. It has obtained a legal opinion from planning barrister John Hobson QC which held that by linking the outcome of planning decisions to financial rewards, any decision would be “tainted” and open to question. But after recent banana skin episodes and legal challenges Ministers are unlikely to have left such an obvious loophole and the Department has said that the New Homes Bonus "is not intended to encourage housing development which would otherwise be inappropriate in planning terms."

So what happens to the money?

In case people don't have any ideas on how the Bonus can be spent Grant Shapps has been making some suggestions. “Communities themselves get to decide how this money is spent,” he explained, “so if a lack of facilities for teenagers is a major problem then a playground or five a side football pitch could get the green light. So I urge all local campaigners to get in touch with their council to explore what plans they have to use the proceeds of growth to meet local needs and whether it can be used to get some of these projects off the ground.”

Local Authorities have been notified of their provisional allocations for 2011/12 and had until 10 March to make representation to the Department for Communities and Local Government. An announcement on final allocations will be made in April 2011 and actual payments shortly after. However, the Government has cut its grant to the Borough Council for 2011/12 by £950,000 and it has also reduced the grant for 2012/13 by a further £659,000. So the New Homes Bonus will not be extra money that the government pays to local authorities, simply cash it distributes in a different way.

Communities that accept new developments are unlikely to feel that they have hit the jackpot as locally any cash generated will be split between the County Council (20%) and Hinckley and Bosworth Borough Council (80%). Local authorities will be able to decide how to spend the funding in line with local community wishes. The Government says that it "expects local councillors to work closely with their communities – and in particular the neighbourhoods most affected by housing growth – to understand their priorities for investment and to communicate how the money will be spent and the benefits it will bring. This may relate specifically to the new development or more widely to the local community. For example, they may wish to offer council tax discounts to local residents, support front line services like bin collections, or improve local facilities like playgrounds and parks. This will enable local councillors to lead a more mature debate with local people about the benefits of growth, not just the costs."

It seems that none of the cash generated by new housing in Groby will come directly to Groby Parish Council, most will go to Hinckley and Bosworth Borough Council. But this does not mean that it will not be used for the benefit of Groby residents, as Sanjiv Kohli, Deputy Chief Executive at Hinckley explained. "We will encourage Parishes to put forward suitable and viable projects for consideration and any amount (to be agreed by Council), within the overall allocation, will be subject to negotiation with parishes on a case by case basis. Any allocation will not be automatic. Part of that negotiation will also involve the County Council, with a view to the Parishes benefiting from both elements of the allocation," he said.

Local residents may feel uncomfortable that the money that is designed to act as an incentive to accept new housing does not automatically come to the village and is subject to a bidding process and negotiation. The Government says that local authorities and their communities will have the freedom to spend New Homes Bonus revenues according to local wishes - for example, improving play areas, transport improvements, town centre regeneration or even Council Tax discounts. Because the bonus is paid for six years the sums involved can be very large, but however fairly the system is administered until they see it in action local communities may still feel that there is a risk that they get the housing but don't get the money.

Here's the original June 2010 article about the Bonus proposals -

Housing targets scrapped – now it's cash for houses

Residents may have been encouraged by reports in the media that the new Government coalition plans to scrap housing targets handed down to Local Authorities. Instead Councils will be offered cash from a 'Matching Fund' which will double the Council Tax they receive from any new houses but only for six years. If the proposals are adopted they can use the money to provide infrastructure improvements or hold down Council Tax.

Could this mean the pressure will be off communities like Groby and the target for new housing completions which formed part of the Local Development Framework for the village can safely be assigned to the waste paper basket? Will the fear that the target was really the thin end of the green wedge which would have opened the door to more housing subside? And will Bloor's reconsider an appeal against the refusal of planning permission for the land near Groby cemetery?

Cautious optimism

Last month the Leicester Mercury reported cautious optimism from groups opposing major developments across the County following news that the scrapping of targets could result in the slashing of the previous target of 100,000 homes to be built across Leicestershire between now and 2026. Hopes were expressed that large developments such as the 5000 homes proposed for the Barkby Thorpe area would be dropped and the houses would be spread more widely. But could this mean even more pressure on villages like Groby where the development currently proposed is much smaller?

A spokeswoman for the Department of Communities and Local Government said "The new Government is committed to giving a greater say to people, communities and councils. This will include abolishing regional strategies with their centrally imposed housing targets, and ministers are currently considering how best to achieve this."

Call for full consultation

But the Campaign to Protect Rural England is reported to have urged the Government to consult widely on its proposed changes to the planning regime. The organisation’s head of campaigns, Ben Stafford, said: “A new planning system should keep the best of what has gone before, including a plan-led approach, strong protection for Green Belt land and the wider countryside, as well as making better use of previously used ‘brownfield’ sites. Given the scale of the changes the Government is proposing, there must be a full process of consultation before the new Bill appears this autumn. A draft Bill would give MPs and others the chance to make sure that the final proposals are strong and effective.”

And the Royal Town Planning Institute has warned that summary abolition of major parts of the planning system without a viable alternative in place could place economic recovery at risk. The Institute is concerned that Government proposals to abolish regional planning are based mainly on an objection to imposed regional housing targets rather than the principle of strategic planning. Ann Skippers, president of the RTPI, said: “Moves towards giving local communities more power are welcome, but we feel there is a real danger in hastily abolishing regional planning.”

Meeting the need for new housing

So if the targets are to go how will housing needs be met? A briefing note entitled “Housing Targets and Planning” produced for Members of Parliament gives an indication of how the new arrangements would work and the reasons for the changes which are being proposed.

It explains that Governments have been trying to use the planning system to stimulate housebuilding since the 1990s. Local planning authorities have been heavily pressured to set aside enough land for housebuilding so that the Government’s targets could be met. However, in areas of high demand, particularly on the South East, local authorities often resist their housing targets. One reason is their argument that higher spending on infrastructure would be required to support the housebuilding. It adds that housebuilding has been well below the Labour Government’s targets, partly because of planning difficulties and partly because of the banking crisis, which started with problems in housing finance in 2007.

The complicated Housing and Development Delivery Grant, costing £250 million nationally, appears to have been one of the ways in which the outgoing Government tried to encourage local authorities to deliver key objectives. This is to be scrapped and the cash used to kick start a new fund which will grow each year, but this would be partly by diverting £250m per year from what would otherwise be the overall increase in formula grant to councils. The 'Matching Fund' would reach £1250 million per year by 2014-15.

A new incentive

The Coalition plan aims to use this fund to give local authorities a different incentive to increase house building and the briefing document says “To tackle this deficiency, we will match the additional council tax raised by each council for each new house built for each of the six years after that house is built. As a result of these measures, councils will get an automatic, six-year, 100 per cent increase in the amount of revenue derived from each new house built in their areas. Local councils and local voters will know that by allowing more homes to be built in their area they will get more money to pay for the increased services that will be required, to hold down council tax, or both. This will be a permanent, simple, transparent incentive for local government and local people to encourage, rather than resist, new housing – of types and in places that are sensitive to local concerns and with which local communities are, therefore, content.”

More questions

The layman is not the best person to interpret what this means exactly but perhaps questions remain about who gets the money, who decides on how it will be spent on infrastructure, whether the money in addition to the Borough tax also includes Parish and County Council precepts, and whether the decision on where the housing goes is still decided at Borough level? Unless the legislation is drafted quite tightly, residents will be left wondering whether Groby gets the houses and Hinckley or the County gets the money, but of course this may not be the case. Nevertheless the fear must be that such a carrot may provide an incentive to overcome planning obstacles and approve developments.

The German and Swiss experience

There is little comfort to be found further down the Parliamentary briefing note as it points out that decentralised planning systems have a long and successful history in Europe, particularly in encouraging enough new development to keep house prices at a reasonable level.

“For example in Germany all councils have their own discrete planning departments, each of which is incentivised toward developing land for residential and commercial use by the local allocation of central government grants and by local tax-raising powers,” it says. “The result is that, over the last three decades, the number of housing completions per capita has been consistently higher in Germany than in the UK. Switzerland is another example of a decentralised planning system that has consistently delivered greater numbers of new builds per capita than in Britain. Because the system allows residents and communities to directly benefit from encouraging more residents, communities are happy to expand.”

So the message seems to be that you don't need to force new housing on communities. Just offer the residents money for essential infrastructure development or to hold down Council Tax and not only will you get them to accept the houses you need but you may also get them to accept more houses than you would through targets.

Hopefully any areas of concern have been, or will be, resolved and the pressure will come off villages such as Groby that have already been transformed by the loss of it's fields to new homes. But until the full implications of the new policy become clear it may be too soon to call for three cheers.