Friday, 4 February 2011

Why the New Homes Bonus is a disaster for Hyndburn and East Lancashire

The government would have us believe that the New Homes Bonus is a simple government initiative intended to create incentives for house building. Equitable strategic government housing targets have now been abolished.

Instead it is a choice for local areas. Sounds so simple and fair right?

It isn't. Money is being deducted from all Council budgets and paid back to those that build. My issue here is this: the south requires homes; but the north does not. The policy is designed only to deal with undersupply, so the result will be that payments will predominantly be focused in the South, at the expense of the North.


The NHB could also be problematically variable depending on whether areas are urban or rural; or NET receivers or contributors to Formula Grant. The amounts involved are not insubstantial, Hyndburn Council alone may lose millions of pounds due to the New Homes Bonus.

But not only there is nothing in the policy to deal with oversupply, if we look at this in conjunction with other recent developments in housing policy it becomes clear that oversupply is a problem the government are not taking seriously. Housing Market Renewal money has been pulled - £50million of which was removed from Woodnook. This money was specifically aimed at dealing with a surplus of empty homes.

The New Homes Bonus is unfair. It is counterproductive if you have (i) a declining population - 350 less households in the last 6 years, (ii) 2500 empty properties already as in Hyndburn's case. Where is the logic for new build? This could compound an already serious situation. Where is the encouragement for dealing effectively with the growing number of empty homes? It is nowhere to be seen.

Deducting demolitions from new build totals is another little device to reduce funding to Northern deprived Boroughs, though the government will say this only includes short term voids and occupied properties. A significant proportion of these demolitions are in Hyndburn.

Taking away the old system of rewarding Councils with Planning Gain which gave an efficient Hyndburn Council generous rewards to fund year 1 and year 2 of the New Homes Bonus is essentially another regional cut that will be used to fund Councils in the South which need more homes. I will state it again: the problem in the North is oversupply, not undersupply.

The Home Builders federation believe the problem is much worse than that. By their calculations only Year 1 will be funded by the old Housing and Planning Delivery Grant (£196m set aside) and the top slice will kick in straight away in year 2.

The government in years 3 to 6 is going to top slice the formula grant given to Councils to fund the NHB thereafter. This is an offense to tax payers in Hyndburn.

It is very hard to predict the detailed outcomes, but the impact assessment itself admits this could be a real problem – the Home Builders Federation did some fairly complicated modelling of the NHB to see if it could work out the “winners and losers” of the process, but having met officials it seems it’s even more difficult.

After the top-slice, the New Homes Bonus may unduly punish urban authorities (a big stick) and unduly reward wealthier rural authorities (a superfluous carrot).

The same can be said of setting payments at a national level which hits Band A constituencies hard. Band A constituencies have higher Band A Council Tax rates; and southern well-to-do Council's with low D, E and F Council Tax rates will gain from this national averaging.

The Home Builders Federation are obviously supportive of any measures to increase new house-building but they have been fairly robust in their response to the New Homes Bonus – it should not be anti-market or anti-demand, and it needs to truly reward local people.

Of all the housing policies that this regressive government has brought forward, this is possibly the most unfair. With deprived areas like Hyndburn facing huge direct cuts in funding to pay for well-heeled housing to leafy Councils in the south. There is no Plan B. No plans to deal with oversupply and no care that residual deprivation is not being given a hand up but a steel-toe-capped kick in the teeth.