The Government has set aside almost £1bn to kickstart this scheme and ensure those areas that go for growth now benefit now. In the longer term incentives will be funded from Formula Grant and Government expects £1.5bn to be paid to communities annually once the scheme is in full swing.
Through the New Homes Bonus the Government will match the council tax raised from new homes for the first six years. The bonus available for an affordable home will be up to 36 per cent more than for a similar market home, equivalent to an extra £350 per house premium every year. Empty properties brought back into use will also receive the cash bonus for six years.
This works out at payments of over £9,000 paid on average to each Band D home or almost £11,000 for an equivalent affordable home. So if an area increased the number of homes by 1,000 units this could earn a community £10m to spend as they see fit – significant funding at a time when public finances are tight.
These incentives are part of Government’s wider programme to put power in the hands of local communities to drive economic growth and create jobs.
Grant Shapps said:
"Telling communities what homes they need and where they should be built has had catastrophic consequences. Housebuilding levels have nosedived hitting the construction industry hard and in many areas caused local tension by dividing communities.
"We need to get the country building again – but not through a Whitehall knows best arrogance. To kick start a housebuilding revolution development needs to be backed by local communities rather than opposed by them. That’s why we are introducing powerful new incentives giving communities a reason to say yes to new homes. Rather than feeling the strain of new homes through extra pressure on local services local residents will feel the direct benefit as they get to choose how the money is spent."
Communities Minister Andrew Stunell said:
"These incentives are part of the Coalition Government’s wider drive to put power in the hands of local communities to boost economic growth and create jobs. It is a real opportunity for communities to not only build new homes and provide a much needed shot in the arm to the local economy but also to address other local priorities at a time when public finances are tight. I know many councils have already seen this potential and are forging ahead with bold plans. But I urge all councils to now work with residents to agree how the bonus can benefit them."
With housebuilding at its lowest peacetime level since 1924 the country needs new homes now and the economy needs the boost to jobs and prosperity this brings. That’s why those areas currently building homes will be benefit now and Ministers announced the first cash payments being made under the scheme. 326 local authorities will receive a share of almost £200m for increasing the housing stock by almost 150,000 in the first year of this scheme.
Communities themselves will decide how to spend this extra funding – whether council tax discounts for local residents, boosting frontline services like rubbish collection or providing local facilities like swimming pools and leisure centres.
This will mean that for the first time, rather than having development forced on them from Whitehall through centrally imposed targets, there is a reason for communities to support growth as they will be able to see the benefits of development in their area for themselves.
Ministers see the New Homes Bonus as a real opportunity for communities to not only build much needed homes and give their area a welcome economic boost but also through the bonus payment to address other local priorities. Ministers have called on all councils to consult residents on how they can work together to agree how the Bonus could be used to meet their local needs.
Ian Baker, Group Managing Director for Housebuilding at Galliford Try Homes said:
“The government may believe that the New Homes Bonus is the panacea to the housing crisis, if only the solution was so simple. While acknowledging today that housebuilding is at an all time low and will boost jobs and prosperity, the government fails to take into account the sea-change of opinion that is needed at local community level to accept new homes. To dangle a financial carrot in front of communities, already reeling from proposals to cut local services, as an incentive to accept new homes is to confuse two very different issues.
“The New Homes Bonus is not a rubber stamping exercise. Community buy-in is crucial to gaining planning consent, and while housebuilders already invest in this valued process sensible housing proposals could still be high jacked.
“Mr Shapps says that the New Homes Bonus will sit alongside the government’s current national planning policies yet it is these that are in need of radical change alongside a promised reduction in regulation, we have yet to see, and concrete plans to encourage lending to homebuyers. The question remains what happens if the Localism Bill fails to deliver new homes in the volume required?”
Steve Lees, Director at SmartNewHomes, said:
“Despite the government ring-fencing nearly £1billion for local authorities that agree to new developments in their area, on its own, the question remains whether this money will be enough to counter nimbyism in areas where new homes are needed most. Incentivising local people to agree to new homes in return for sustaining local services that are under already threat, is certainly not ‘the powerful incentive’ the industry expected.
“If the New Homes Bonus is successful in increasing the number of new homes that are granted planning this year it will still take much longer before the industry is able to make any serious dent in the housing shortfall. The suggestion by the CPRE that the New Homes Bonus is illegal could also delay the implementation of the Localism bill which has already been hit by setbacks.”
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