Announcement

Grant Shapps kickstarts local housebuilding revolution

This news article was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

Housing Minister Grant Shapps today kicked off a local housebuilding revolution where communities who go for growth by building new homes reap…

Housing Minister Grant Shapps today kicked off a local housebuilding revolution where communities who go for growth by building new homes reap the benefits and at the same time deliver a much needed economic boost to their local area.

The Minister announced the first cash bonuses totalling almost £200m for communities building new homes and confirmed final details of how local housebuilding will be transformed through powerful incentives that will encourage local communities to back rather than oppose development - as they get to choose how these building bonuses are spent.

The Government has set aside almost £1bn to kickstart this scheme and ensure those areas that go for growth now benefit now. In the longer term incentives will be funded from Formula Grant and Government expects £1.5bn to be paid to communities annually once the scheme is in full swing.

Through the New Homes Bonus the Government will match the council tax raised from new homes for the first six years. The bonus available for an affordable home will be up to 36 per cent more than for a similar market home, equivalent to an extra £350 per house premium every year. Empty properties brought back into use will also receive the cash bonus for six years.

This works out at payments of over £9,000 paid on average to each Band D home or almost £11,000 for an equivalent affordable home. So if an area increased the number of homes by 1,000 units this could earn a community £10m to spend as they see fit - significant funding at a time when public finances are tight.

These incentives are part of Government’s wider programme to put power in the hands of local communities to drive economic growth and create jobs.

Grant Shapps said:

Telling communities what homes they need and where they should be built has had catastrophic consequences. Housebuilding levels have nosedived hitting the construction industry hard and in many areas caused local tension by dividing communities.

We need to get the country building again - but not through a Whitehall knows best arrogance. To kick start a housebuilding revolution development needs to be backed by local communities rather than opposed by them. That’s why we are introducing powerful new incentives giving communities a reason to say yes to new homes. Rather than feeling the strain of new homes through extra pressure on local services local residents will feel the direct benefit as they get to choose how the money is spent.

Communities Minister Andrew Stunell said:

These incentives are part of the Coalition Government’s wider drive to put power in the hands of local communities to boost economic growth and create jobs. It is a real opportunity for communities to not only build new homes and provide a much needed shot in the arm to the local economy but also to address other local priorities at a time when public finances are tight. I know many councils have already seen this potential and are forging ahead with bold plans. But I urge all councils to now work with residents to agree how the bonus can benefit them.

With housebuilding at its lowest peacetime level since 1924 the country needs new homes now and the economy needs the boost to jobs and prosperity this brings. That’s why those areas currently building homes will be benefit now and Ministers announced the first cash payments being made under the scheme. 326 local authorities will receive a share of almost £200m for increasing the housing stock by almost 150,000 in the first year of this scheme.

Communities themselves will decide how to spend this extra funding - whether council tax discounts for local residents, boosting frontline services like rubbish collection or providing local facilities like swimming pools and leisure centres.

This will mean that for the first time, rather than having development forced on them from Whitehall through centrally imposed targets, there is a reason for communities to support growth as they will be able to see the benefits of development in their area for themselves.

Ministers see the New Homes Bonus as a real opportunity for communities to not only build much needed homes and give their area a welcome economic boost but also through the bonus payment to address other local priorities. Ministers have called on all councils to consult residents on how they can work together to agree how the Bonus could be used to meet their local needs.

Notes to editors

  1. The New Homes Bonus is part of the Coalition Agreement and provides incentives for local authorities to deliver sustainable development, including for new homes and businesses. A consultation on the proposals was published on 12 November 2010. The Government is today publishing the  Final Scheme Design for the New Homes Bonus and this can be found at: http://www.communities.gov.uk/publications/housing/finalschemedesign.
  2. The long-term demand for housing is strong. Despite this, housing development has consistently fallen over the last decade. On average 26,000 fewer homes were built each year from 1997 to 2009, and in 2009 there were just 118,000 completions, the lowest level of house building in peacetime since 1924.
  3. The previous Government tried to remedy falling levels of housebuilding by using centrally determined housing targets that local authorities and communities had to meet. These failed to deliver the housing this country needs. The Housing and Planning Delivery Grant (HPDG) that was introduced to support targets and improve housing delivery was ineffective and complicated, and local authorities could not rely on it as a sufficient and stable incentive.
  4. A series of recent independent reviews by Sir Michael Lyons, Kate Barker and Professor Michael Ball highlighted the powerful role that local incentives could play in driving housing delivery. The current local government finance system does not provide the right incentive or rewards for councils to build new homes or bring long term empty properties back into use. If a local authority promotes the building of homes in the area it governs, little of the economic gain is captured by the local community. As a result existing residents see only further strain on public services and reduced amenity when new homes are built.
  5. The scheme will provide this incentive and return power back to local communities. Decisions on where and how development occurs will rest locally and ensure that the benefits of growth are returned to communities.
  6. £946m has been set aside over the Spending Review period to get the scheme up and running. In 2011-12 this is almost £200m and £250m in each of the remaining years. Funding beyond these levels will come from Formula Grant.
  7. Details of funding allocations for 2011-12 being announced today can be found using the New Home Bonus Calculator, which can be found under ‘Related downloads’ at: http://www.communities.gov.uk/housing/housingsupply/newhomesbonus/.

Supportive statements

Mark Clare, CEO of Barratts:

Clarity on how the new homes bonus will operate is an important step forward and we are already talking to local authorities about what the implications of our planned developments will be in terms of additional funding for them. However, there is still some way to go to define the wider policy framework needed to ensure that the localist agenda can provide the new housing the nation needs.

John Tutte, Group Managing Director, Redrow plc said:

Redrow welcomes any incentive to address the chronic shortage of new homes brought about by failures in the planning system to deliver housing in areas of most need. We believe the New Homes Bonus is a practical solution that will encourage many local authorities to grant more planning permissions for new homes. In response to the announcement of the bonus, we are already working with a number of local authorities to bring forward much-needed new housing.

Stephen Stone, Chief Executive of Crest Nicholson said:

There are some very real challenges facing the housing industry at the moment and unless we take some decisive measures to mitigate their effect, the prospects for recovery will be severely hampered. We are already experiencing a severe housing shortage in the UK and there is a real risk that, unless direct action is taken to help unlock the market, issues around scarcity of supply will only be exacerbated. It’s clear that maintaining levels of housing investment should be a key priority and incentives such as the New Homes Bonus, which are designed to increase housing levels and redress the current imbalance in supply and demand, should be welcomed.

Stewart Baseley, Executive Chairman on the Home Builders Federation said:

The country is facing an acute housing crisis and it is imperative we have a planning system that delivers sufficient land for the homes we need. The New Homes Bonus is a crucial part of any new incentive based structure and a simple, easy to understand system is essential.

New Homes Bonus launch quotes - 11 February 2011

Professor Michael Ball, Reading University:

My recent review of house building for the Department, as well an extensive body of academic work, highlights the importance of providing incentives to encourage communities and local authorities to support housing development in their area. For this reason, I welcome the New Homes Bonus as a step in the right direction.

Dr Christian Hilber, London School of Economics:

Our research shows that constraints from the current planning system on the amount of land that is made available for housing development, has a causal effect on house price inflation (and affordability) in England. It also demonstrates that such constraints substantially increase short and long term house price volatility. Our research notes that the present misalignment of costs and benefits arising from development acts as a strong disincentive to local areas to support such development. Based also on evidence from overseas, we recommend the use of strong fiscal incentives to help change behaviours and reverse this position.

Mark Clare is CEO at Barratts, the UK’s biggest builder by volume:

This consultation is a welcome step forward as the incentive system proposed is simple and clear - we are already talking to local authorities about what the implications of our planned developments will be in terms of additional funding for them. However, there is still someway to go to define the policy framework needed to ensure that the localist agenda can provide the new housing the nation needs.

Stewart Baseley, Executive Chairman of the Home Builders Federation:

The country is facing an acute housing crisis and it is imperative we have a planning system that delivers sufficient land for the homes we need. The New Homes Bonus is a crucial part of any new incentive based structure and a simple, easy to understand system is essential.

Councillor Jim Hakewill, Leader - Kettering Borough Council:

What I particularly like about the New Homes Bonus Scheme is that it is a direct and clear reward to local people who embrace growth. Local people want to see the growth dividend in their locality and this scheme delivers that.

John Tutte, Group Managing Director, Redrow plc:

Redrow welcomes any incentive to address the chronic shortage of new homes brought about by failures in the planning system to deliver housing in areas of most need. We believe the New Homes Bonus is a practical solution that will encourage many local authorities to grant more planning permissions for new homes. In response to the announcement of the bonus, we are already working with a number of local authorities to bring forward much-needed new housing.

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