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Rewards for homes with the New Homes Bonus

Housing Minister Grant Shapps today pledged cash for communities who allow new homes to be built in their area. Almost £1bn Government funding…

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

Housing Minister Grant Shapps today pledged cash for communities who allow new homes to be built in their area. Almost £1bn Government funding has been set aside for councils that welcome new housing development, which they will be able to spend to benefit their local community.

In proposals published for consultation, the Minister has announced that the Government will match the council tax raised from new homes for the first six years through the New Homes Bonus. Councils and communities will work together to decide how to spend the 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.

Mr Shapps said councils who have already set out their stall for growth are building up rewards for their local area, and all homes that are built now will benefit from the new funding. Councils will also receive a higher level of funding for building new affordable homes.

Grant Shapps said:

We are ending the system where the Government can tell communities what and where to build - that top-down approach slowed housebuilding to a trickle, so we need to take action now to get the country building again. That’s why we’ve set aside almost £1bn so councils who build more homes start benefiting immediately from the extra cash, which they can spend on improving the local area.

For too long communities have fought against development because they can’t see how it does anything to improve their lives. I’m determined to change this. The New Homes Bonus will ensure that those communities that go for growth reap the benefits of development, not just the costs.

Councillors will now be able to lead a mature debate about the benefits of development. And rather than being punished for not meeting targets, local communities will now have a reason to say yes to new homes, because they will benefit from better local services, or perhaps the redevelopment of their town centre in return for backing new housing.

Executive Chairman of the Home Builders Federation, Stewart Baseley 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 an essential part of the new incentive based structure and we welcome the commitment to a simple, easy to understand system.

Councils will benefit from a higher level of funding for encouraging new affordable homes to be built in the local area, with council tax matched and then supplemented by £350 per home each year for six years. Today’s announcement follows the Government’s commitment to invest £4.5bn in affordable housing over the next four years, which will deliver up to 155,000 new affordable homes.


Watch a video about the New Homes Bonus.

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Notes to editors

1. The consultation on the New Homes Bonus seeks views on the implementation of a powerful, simple and transparent system for incentivising local authorities to increase their housing supply. This follows the Coalition Agreement to provide incentives for local authorities to deliver sustainable development, including for new homes and businesses. A copy of the consultation can be found at:

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 proposed scheme will provide this incentive and return power back to local communities. £900m has been set aside to get the scheme up and running. Decisions on where and how housing 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. In 2011-12 this is almost £200m and £250m in each of the remaining years. Funding beyond these levels will come from Formula Grant.


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Published 12 November 2010