Home truths about the Bonus

3 Apr 13

The Budget announced a range of measures to boost home ownership. But the underlying problem is a shocking fall in house building by councils, something the coalition’s New Homes Bonus has singularly failed to address

House building in England is severely depressed, with only 98,000 new homes started in 2012. Not only is this less than half the number needed to keep pace with household formation, it is also 11% below the already inadequate level recorded in the previous years.
So despite all the government’s rhetoric about stimulating growth and supporting homebuilding they are presiding over a crisis that is showing no signs of ending.

Why is this happening? There are a number of fundamental causes. Public confidence has been severely shaken by the uncertain economic outlook, obtaining a mortgage has become much harder and there has been a drastic fall in public investment.

But there is also planning confusion following the government’s decision to tear up the previous framework, which set regional targets for matching housebuilding to estimated need. The new framework has abolished targets and inevitably has triggered moves to cut the supply of land for housebuilding in many parts of the country.

Councils are planning 272,720 fewer homes than would previously have been expected, leaving the coalition presiding over the lowest level of house building since the 1920s.

This was widely forecast before the last general election. In response to fears that the impact of localism would be to depress planning consents for housing, the Conservatives proposed a ‘New Homes Bonus’. This was a cash sum, paid annually over a six-year period, to reward increases in the size of the local housing stock. It was introduced early in the life of the coalition government and three annual payments have been agreed to date, totalling £1.3bn, with commitments reaching £3.3bn because the payments continue over six years.

This is, by any measure, a significant level of public expenditure, exceeding the total spent on new affordable homes over the lifetime of this Parliament. So it is worth examining how the New Homes Bonus is working and if any benefits can be attributed to it.

The shocking answer is that it is not possible to detect any benefits on the measures the bonus was supposed to influence, namely the growth of planning permission for new housing and the output of new homes.

The total of residential units granted consent in the first three quarters of 2012 amounted to 95,514. When the final quarter figures come in, total approvals could reach around 125,000. But in both years under the coalition the number is lower than in 2010, when they were beginning to recover from the 2008/09 downturn. They have flatlined at around half the level necessary – estimated at just over 230,000 approvals a year.

Housing starts show a similar picture of flatlining since 2010, with an 11% drop in the past year.

On the basis of these national statistics, there is no evidence to show the New Homes Bonus is acting as a spur to stimulate new housebuilding.

But what is happening at the local level? It is worth looking at the 17 local authorities in England that receive the largest sums for New Homes Bonus. These are mainly London boroughs and metropolitan districts but also include Bristol, Cornwall, Milton Keynes and Wiltshire. Each has received more than £10m in New Homes Bonus.

Because of incomplete data for 2008/09, 2009/10 and 2010/11, it is not possible to precisely compare those years. But on the basis of 15 of the 17 authorities for which comparable data exists, the 2011/12 total is not only massively down on 2005/06, but is 6% lower than in 2010/11.

Therefore the evidence for the authorities most likely to see a positive effect from New Homes Bonus does not suggest any such impact.

When challenged on these figures in the House of Commons last year, housing minister Mark Prisk cited Manchester, Sheffield and Bradford as examples of authorities showing the way. There is data for these three authorities, two of which – Manchester and Bradford – are also among the 17 largest recipients of the New Homes Bonus. In 2011/12, there were 37% fewer approvals for the 17 than in 2005/06. In the same year, the three councils singled out by the minister were 55% behind their 2005/06 level.

So the evidence from the authorities ‘leading the way’ is no better than elsewhere. As throughout the rest of the country, residential planning consents fell dramatically in the course of the recession in 2008 and 2009, and have not recovered since.

It is difficult in the light of this data to understand the minister’s confidence ‘that there will be at least 400,000 additional homes as a direct result of the bonus’.

Indeed, officials in his own department do not appear to believe his claims, as they have been quoted in the Financial Times as saying that the 400,000 figure referred to homes built in the previous few years.

The reality is very different from the ministerial claims. Far from bringing about a new era of house building, the government’s failed policies are making the biggest housing crisis in a generation worse, not better.

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    Nick Raynsford

    Nick Raynsford is a former Labour local government minister and was MP for Greenwich & Woolwich from 1992 to 2015

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