New Homes Bonus – but not for the North!

New research commissioned by public service union Unison confirms what most housing professionals have known for a while – that that the Government’s New Homes Bonus Scheme is draining scarce funding away from the recession-hit north, to wealthier parts of the country in the south.

The New Homes Bonus is a general annual grant paid to local authorities for a period of 6 years – the amount of the grant depends on the number of new homes that have been built in the local authority area during the previous year. The amount paid is equal to the national average for the council tax band and it is paid for six years as an un-ringfenced grant.

The Government says that the New Homes Bonus is designed to ‘create an effective fiscal incentive to encourage local authorities to facilitate housing growth’.

Matthew Creedy -housing specialist at ethical partnership said that “The money for the New Homes Bonus is deducted from local council housing grants and then redistributed not on the basis of need or population, but to those councils who are granting planning permission for new homes – which as we know largely depends on applications made by private developers. So how much a council gets from the Bonus depends on how many new homes are built the previous year, with huge differences in winners and losers created across the country”.

It’s hardly surprising that developers are shying away from supplying homes in those poorer areas hit hardest by the recession, but are instead choosing to build in areas where there is more potential for profit.

The study of councils in England showed that 60 per cent of New Homes Bonus money was spread between London, the South East, East of England and the South West. Among the biggest losers in the list are Oldham, Knowsley, South Tyneside, Gateshead Newcastle, Liverpool, Wirral  The biggest losers were Oldham (which gets back 0.11p for every £1 of local housing grant lost) and Knowsley (which gets back 15p for every £1 lost).

The biggest winners according to the research are Uttlesford in Essex (which gets back £19.34 for every £1 lost) and Basingstoke and Deane (which gets back £18.70 for every £1 lost).

The Department for Communities and Local Government has allocated nearly £250m p.a. to fund the scheme fully in to 2014-15- with funding beyond these levels coming from the Formula Grant. The 2012/13 local government finance settlement has already removed £176m from the Formula Grant and plans require £230m further to be removed from the grant each year until 2016/17.

The formula grant comes with no strings attached and councils can spend it as they see fit. Formula grant is mainly made up of the business rates, which councils collect from their local businesses, as their contribution to the cost of local public services. This is paid into a central pool and redistributed by central Government in the finance settlement. Formula Grant also includes funding from central government, known as ‘Revenue Support Grant’ and money from the Home Office to fund police authorities, called ‘Principal Formula Police Grant’. In 2012/13, the Formula Grant is approximately £29 billion

Ethical partnership is working with local communities and house builders to meet local housing needs. If you have a housing project that you think we can help you with then please contact us.

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