The New Homes Bonus

In an attempt to tackle the UK's housing shortage, an important new government policy - The New Homes Bonus - has been drawn up to reward local councils each time a new home is built.  The rewards, based on the council tax band of individual properties, offer monetary bonuses for each of the first six years the property is occupied.

According to the government, "The New Homes Bonus addresses the disincentive within the local government finance system for local areas to welcome growth. Until now, increased housing in communities has meant increased strain on public services and reduced amenities. The New Homes Bonus will remove this disincentive by providing local authorities with the means to mitigate the strain the increased population causes. This will ensure that the economic benefits of growth are returned to the local authorities and communities where growth takes place."

The premise is ostensibly good, however, as today's Channel 4 news Fact Check report reveals, there is a problem: the scheme will disproportionately benefit affluent areas such as Surrey where there is a greater demand for high-cost 'larger executive homes'.   In turn, local councils in more deprived areas in the North of the country and in London boroughs such as Hackney, will receive a lesser amount of 'bonus' money to fund vital public services.

Government subsidies will offer local councils in areas such as Waverly and St Albans an average of £1,567 per new build; however councils in poorer areas such as Liverpool, Tower Hamlets and Hackney will receive an average of £1,268. 

As Cathy Newman explains, "linking the New Homes Bonus to council tax is flawed".  Rather than focus on meeting demands for affordable homes and social housing; the scheme rewards those councils that provide high-cost accommodation for already affluent areas with a higher monetary incentive.  As outlined in the Channel 4 News report, the policy has already received criticism from communities and organisations who are worried that the scheme will discourage the building of new flats and social housing developments in poorer areas, as the financial return will be an average of 26% less.  As well as this, the scheme will perversely favour the construction of executive housing and exacerbate the north-south divide, according to housing experts. (Jamie Doward, The Guardian, 27 February 2011)