Posted by: Adam Roake | August 9, 2010

NEW HOUSING POLICY 2 – THE NEW HOMES BONUS

The second of Grant Shapps’ policy ideas is the New Homes Bonus. In a letter to all Council Leaders released today, Mr Shapps proposes a new bonus to local authority revenue grant to replace the Housing and Planning Delivery Grant. Instead of receiving HPDG for meeting “top-down” house building targets, local authorities, “… who take action now to give planning consent and support the construction of new homes will receive direct and substantial benefit from their actions“. In an interview on the Today programme on Radio 4, Shapps confirms that the bonus will be met from within the existing revenue grant settlement. As he so neatly puts it,

“… if you like it’s a different way of divvying up the money to reward when they take the action, which is good for their community – more houses“.

Essentially it seems the idea (still of course not strictly a policy – that won’t happen until after the Spending Review and any necessary legislation will have to wait until the Localism Bill, due to be published in December) is that councils, which grant planning for homes and get them built, will get a bonus out the existing local authority pot, whilst those that don’t will lose out. According to Shapps, “what we need to do is to reward local authorities when they take the right decision… to build more houses” and “…when you do make the choice to build, we’re going to reward you“. Although he didn’t say it, since the pot is finite, if you don’t choose to build it follows that you will be punished. As regards the size of the bonus pot, Mr Shapps tells us that the maths indicates it will be something like £200million.

There are a number of strange consequences in this approach. Firstly, central government’s view is clearly that the “right decision” for local communities to take is to welcome new housing with open arms. Unlike the “Right to Build” policy, this “right decision” is not to allow tens of new homes at a village but rather thousands of new homes at an urban level. Just as local councils are gaily abandoning housing targets, because under the Localism agenda they’ve been promised that housing decisions are now theirs alone to make, Mr Shapps has wielded the big funding stick. If they make the “right decision” they can have the money but if they make the “wrong decision”, taking only local issues into account of course, they cannot.

If the decision to be taken is so obvious that Mr Shapps can call it the “right decision”, no financial incentive ought to be necessary. But the reality is that entrenched local opposition to housing is unlikely to be swayed by “the Council” receiving an extra few thousand pounds (240,000 homes required, £200million available – you do the maths!). Local Councillors lose their seat if a hundred votes switch sides, so will they really ignore local opposition?

On a different tack, is it cynical of me to think that the prospect of Bonus funds might be considered to influence the decisions of a planning committee so they grant permission despite planning weaknesses?

And what about those councils where there is little or no need for additional housing? After all, they would have received HPDG by meeting low or zero targets but will now be denied a share of Bonus. Will they build inappropriate homes in the wrong place where they are not needed, just to get a slice of the pie?

Is this another example of Centralised Localism; you make the decisions you want at local level, based on local issues, and we’ll decide at central level whether it’s the right decision? I find it difficult to see how revoking regionally set targets for house building (although retaining them as potentially material considerations!) but then withholding funding if you fail to build houses, can truly be described as Localism. No doubt the legislation will explain it all.

Michael Donnelly makes similar points in the Planning Blog and calls the idea a “huge gamble“. I wouldn’t disagree because it seems to me doubtful that it will have the effect Mr Shapps is after – more house building. £200 million pounds is about a quarter of one percent of the total local authority funding from central government (£75,000 million in 2009/2010 according to Local Government Financial Statistics England No.20 2010, table 2.4a, page 57). Added to that it works out at less than £900 per new home, so a 500 home urban extension would only pull in £450,000; is that enough to risk losing your seat for because I don’t think it’s likely to win over your average objector?

And of course the issue that has been completely overlooked is that local authorities don’t actually build houses; they might be the primary planning decision taker but ultimately it is the house builders who deliver the goods. It is somewhat disingenuous of Mr Shapps to suggest that house building has collapsed to new lows because of the previous government’s policies. The reality is that the housing market has collapsed taking with it the house building industry, which has been the only source of new homes for some time now. Under the Bonus proposal, local authorities will still have to persuade house builders to deliver in their area to claim their prize; granting planning permission alone it seems will not be sufficient and of course if the next door borough offers rather less onerous affordable housing terms or demands lower section 106 payments, that is where the homes will be built. Indeed I would suggest house builders should argue that if the council are going to get £900 bonus per home built that should be deducted from any section 106 payment required – it is after all expected to be spent on necessary infrastructure! This proposal offers little incentive to house builders to deliver completed homes; it does however offer them leverage in negotiations over planning permission, which may have completely unintended consequences.

If it is house building that Mr Shapps wants to encourage (and he does say it is a top priority for the Coalition) perhaps he might do better to spend our money on building homes rather than spending it on a half-hearted attempt at bribing us. An extra £200 million pounds on the National Affordable Housing Programme might represent better value and deliver more homes than this game show Bonus proposal.

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Responses

  1. […] the rest of this great post here Comments (0)    Posted in Homes For Sale   […]

  2. Many commentators have drawn attention to the questionable size of the bonus. (Tim Leunig at LSE has some interesting ideas about a how a REALLY large a bonus from the grant of planning permission might actually sway local voter’s inclinations.) But this post is interesting in that in focuses on the inconsistency between saying housing is a local matter on the one hand, and saying that more of it is desirable on the other. Arguably Whitehall cannot possibly say that more housing is desirable at all, let alone move money from “Peterborough” to “Poole” in order to encourage it (as John Healey put it).

    There is a further consideration. The previous regional planning process was – at least in its early stages – backed up by environmental evidence. Are councils now to be encouraged to encourage housing growth irrespective of such evidence ? That might fall foul of European law.


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