The Bonus looks to be a worthwhile contribution rather than a major transformation.
You win some, you lose some Within the tight framework for local government spending does the Bonus offer new money? As the Leaders of South East Council said:
“We .. believe that the NHB will be more effective if it represents additional funding over and above existing sources of revenue.”
However the consultation document sets out the position:
“This policy redistributes a portion of formula grant on the basis of housing delivery
. As a result – in the long
run – there are no additional cost implications to central Government. However, over the course of the Spending Review period, additional funding (over £900m) from central Government will be provided from the abolition of Housing and Planning Delivery Grant. This will fund the total cost of the scheme in year 1; with the remainder spread across years 2-4.”
Plain enough then: all the money comes from resources that local government already had. Abolition of Housing and Planning Delivery grant means rebadging money. By the end of year six when the peak payments are reached NHB will be running at about £1.2bn annually if house building does reach 140,000 a year and it will be redistributing between 3 and 4% of Formula Grant. Whether the specific funding allocated in the Spending Review is genuinely new or not (maybe it is just having less taken away) this notional allocation for year 1 – and through into the later years – will make sure that the first tranche of payments of NHB do not impact on the formula grant otherwise available. Of course in the longer term this all gets swallowed into the overall distribution. But this looks like a way to help get things started.
Another layer of complexity The Bonus is being added to the already complex local government finance system. Working out who will win and who will loose is tricky. Last summer John Healey was estimating that 103 town halls would lose out by an average of £2 million each, while 222 councils would gain by an average of £400,000. Other calculations suggest that there might be a few big winners and lots of small losers. The Government has yet to offer a definitive exemplification although we had hoped to see one alongside the financial settlement in December.
Maybe there will be some simplification to look forward to in the near future. The Government’s promised “local government resource review” is getting underway and the benefits of the NHB may get swallowed up in bigger changes.
How do we improve the quality of existing housing? Despite considerable gains in both the public and private sectors over the last few years there is still much poor quality housing often concentrated in areas with other social and economic challenges. Do we need a “Better Homes Bonus” as part of the new local finance system? NHB is designed to be a simple way of unlocking the NIMBY tendency where that is stifling demand. There is an advantage in staying simple – local councillors will know what they can get if they adopt policies which encourage builders to deliver. There is a disadvantage in having a single minded focus on growth potentially at the expense of other needs.
A bonus best for early birds The Government is keen to get the first payments of NHB made soon and these inevitably will reflect activity already underway. Given that payments for each additional home last for six years and could total over £7000 it is possible to win big on NHB. Some local authorities could make a real difference to their financial position for the rest of this parliament if they act quickly and sustain delivery over 2 or 3 years. A few London Boroughs have seen 2000 to 3000 homes a year built recently and could therefore secure a gross total bonus of £20m.
And now… We can expect developers to be making persuasive pitches to some key local authorities explaining how the Government will reward them. Perhaps some developers will be saying to authorities that they need to help deliver new homes to minimize their losses. During this year we should be able to see how far these arguments have changed attitudes, where new homes are being built and whether that focus on supply has been at the expense of the more complex regeneration of our cities.
Not the whole answer Increasing the rate of new development is only one aspect of housing policy, although it is a critical underpinning to many other desirable outcomes. While we cannot therefore expect the New Homes Bonus to secure other objectives we do need to establish whether it will make their achievement more difficult. Here are two key questions that are important for regeneration, both about dealing existing places:
How do we redevelop areas of low demand? A recent report from Centre for Cities implicitly criticised the public funding of new homes in areas of population decline. But we cannot assume that new homes are only built in areas of net growth. We need to refresh the stock. Will the loss of grant in such areas to fund the NHB contribute to an implicit spiral of decline?
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