Districts protest changes to New Homes Bonus in settlement response

13 Jan 17

Planned changes to the New Homes Bonus will have an adverse effect on communities, shrinking funding and reducing the incentive for new housebuilding, the District Councils Network has warned.

Responding to the provisional local government finance settlement for 2017-18, the DCN said its members will see a 5.2% cut to core spending power. This is compared with average cuts of 1.1% across local government, it stated. 

Introduced by the coalition government, the New Homes Bonus aims to encourage local authorities to grant planning permissions for new housing in return for additional revenue.

In the settlement, the government outlined plans to divert funding from the NHB scheme to upper-tier councils to fund a growing crisis in adult social care.

DCN chair Neil Clarke said the plan essentially “robbing Peter to pay Paul”. It will strip out £75m from district council revenues and “risk destroying the link between economic growth and the funding of local public services”, he said.

Clarke added: “It is clear that district councils are taking the largest hit in spending power reductions between 2016/17 and 2017/18.”

Government plans will see a 0.4% baseline for housing growth introduced, under which councils will not receive any NHB. Clarke called this “unfair” because the idea had not been included in the original consultation on the bonus and “could not have been predicted”.

Many district councils would lose their right to NHB under the new rules and would therefore be shorn of the incentive to build houses, Clarke said.

The government has signalled a strong intention to tackle the housing crisis by announcing a raft of measures, including doubling spending on housing.

Last week, communities Sajid Javid announced he was ‘unlocking’ a £7bn boost to the government’s affordable housing scheme. 

District councils were, Clarke said, at the forefront of these plans, since they are involved in more than half of new home builds across the country. Consequently, the network is proposing that the NHB baseline level be fixed at 0.25% for two years to allow councils a transition stage within which to adjust to the implications of a limit.

The local government finance settlement is set to be finalised and laid before Parliament next month.

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