Last edited 08 Dec 2020

New homes bonus

The New Homes Bonus (NHB) was introduced in 2011 by the coalition government to encourage local authorities to grant planning permission for new houses in return for additional revenue.

Under the scheme, grant funding is provided annually by central government matching the extra council tax raised by new-build homes, conversions and long-term empty homes brought back into use. Payments are also made for providing affordable homes.

The grant is unringfenced. Councils work with the local community to decide how to spend the funding. This does not have to be on the provision of new homes, and might include council tax discounts for local residents, improving local services or providing local facilities.

By 2016/17 more than £4.8 billion had been allocated.

However, in October 2013 the Public Accounts Committee’s suggested that “The Department (DCLG) has yet to demonstrate that the new homes it is funding through this scheme are in areas of housing need…”

In 2014, the Government conducted an evaluation of the effect of the scheme and in the autumn 2015 spending review confirmed a move to allow the full retention of business rates by 2020 and a preferred option of saving at least £800m from the scheme.

In 2015, the government launched a consultation on options for changes to better reflect local authorities’ provision of new housing, suggesting that it “…is appropriate to consider how the incentive element of the Bonus could be further tightened alongside possible changes to respond to the move towards full retention of business rates and the potential for further devolution of powers and responsibilities to local authorities.”

A consultation in 2016 sought views on ways to better reflect authorities’ delivery of new housing and reduce the number of years in which payments are made.

At the end of 2016, the government confirmed:

  • A move to 5-year payments in 2017/18 and then to 4 years from 2018/19.
  • The introduction of a national baseline of 0.4% housing growth below which grants will not be made.

However, it will not, for now, proceed with plans to withhold payments from local authorities who have not submitted a local plan.

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