April 1, 2013 10:21 pm

Town hall bonus for new homes under fire

A builder assembles wooden roofing joists on a new home at a Barratt Developments Plc construction site for residential housing in Bedford, U.K., on Thursday, Dec. 13, 2012. Barratt Developments Plc, the U.K.'s largest homebuilder by volume, said advance sales rose 21 percent as government initiatives to boost homebuilding lifted private reservations in the autumn selling season.©Bloomberg

A £3bn programme to reward councils that oversee more homebuilding is facing calls for an “urgent review” after Whitehall auditors found it had a negligible impact.

The “new homes bonus”, introduced in 2010, was designed to prompt construction by distributing grants to councils that manage large amounts of development. The grant is worth £3.3bn over its first six years and recycles existing funding among local authorities.

But a scathing report by the National Audit Office has concluded that most of the £1.3bn handed out so far has gone to councils where homes would have been built anyway.

It found that the coalition’s claim that the bonus would increase supply by up to 13 per cent over its first 10 years – equivalent to 140,000 new homes – was “unreliable” and based on a “substantial arithmetical error”.

The scheme is controversial because poor areas believe they are being unfairly punished for low levels of housebuilding caused by wider macroeconomic factors.

They believe they are subsidising affluent areas of the southeast where homes are being built because the economy is thriving, not because of council intervention.

“Overall we found little evidence that the bonus has yet made significant changes to local authorities’ behaviour towards increasing housing supply,” the NAO said.

Jack Dromey, shadow housing minister, said the “damning” report had exposed the “failure” of one of the government’s flagship schemes to boost housebuilding. “It is clear that the policy doesn’t work and is unfair,” he said.

Nick Raynsford, Labour’s former housing minister, attacked the “failure of this very expensive policy gimmick” while the Local Government Association said it was “hampering” councils’ ability to plan their long-term budgets.

“While some areas have done well from the scheme, it needs to be remembered that most of the new homes bonus is not new money, but a redistribution of existing funding for local government,” said the LGA.

The NAO found that the communities department was not “systematically” monitoring the impact of the bonus.

Mark Prisk, housing minister, said the criticism was “unduly negative and unfair” and pointed out that planning approvals were up.

“The reality is that the new homes bonus has already rewarded councils for the delivery of 450,000 homes and we are confident that it has the potential to increase supply by at least 100,000 homes over 10 years,” he said.

“The new homes bonus provides a real incentive for communities to grow, to provide more affordable housing and to get empty homes back into use.”

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