South East to gain most from Coalition’s Home Bonus scheme

Our guest writer is Pete Challis, former vice chair of the LGA Housing Committee

Money to fund government grants for the Coalition’s New Home Bonus scheme will be shifted away from councils in the North and London and given to those in the South, according to research. It was recently reported by Left Foot Forward that the Government would not be giving any new money to fund the scheme – it will in fact be funded by money that goes towards paying for local council services. For each new home built, a bonus of six years worth of council tax should be paid to the relevant council.

However, by using CLG data on housing completions for the period 2004 to 2009 makes it possible to see which regions will come off worst by changing the way this money is distributed. The Government estimates that by year six, £1.5bn will be distributed to councils through the Home Bonus scheme.

The Communities and Local Government website saying that almost £29bn was distributed to councils in formula grants in 2010/11. Assuming that £1.5bn is redistributed and formula grants stay the same, it has been found that London and the North West  would lose £125m and £65m respectively, whilst the South East would gain £108m and the Eastern region £71m.

Using housing completions to distribute formula grant shifts resources for day to day council services from the North, West Midlands and London and gives to the South East and Eastern regions.

Housing minister, Grant Shapps, said:

“We will not tell communities how or where to build, or how they should grow. But the New Homes Bonus will ensure that those communities that go for growth reap the benefits of development, not just the costs.”

Research used by the Financial Times claims that: “more than 42,000 new homes have been delayed or dropped since the election” – leaving the government open to criticism for not doing enough for the 1.8 million households on housing waiting lists. Funding to build new social and affordable housing has been subjected to review and spending cuts. Redistributing money given to councils to pay for services such as refuse collection and social care to pay for housing development is an ill-thought blow to local government budgets.