Eric Pickles, the Communities and Local Government Secretary, set aside an initial £1.3 billion to fund the New Homes Bonus, a payment by results incentive paid by central government to local councils for increasing the number of homes.
The Bonus, to be paid each year for six years, is based on the amount of extra Council Tax revenue raised for new build homes, conversions and long term empty homes brought back into use.
However, a report from the Public Accounts Committe said that, two years after its launch, there was no credible data to assess whether the scheme was working. It also said that figures made available suggested that the scheme was actually exacerbating the UK's housing shortage by benefiting areas where the need for new homes was the lowest whilst penalising the local authorities in greatest need.
‘The New Homes Bonus was introduced as a financial incentive for local authorities to encourage the building of new homes. The scheme is funded from existing local authority grants and £7.5 billion will have been redistributed between councils by 2018/2019, so there is a lot of money at stake. It is clearly vital that the incentives work and the government achieves its aim,’ said committee chairman Margaret Hodge.
‘It is therefore disappointing that after more than two years of the scheme being up and running, no evaluation is in place and no credible data is available to show whether the scheme is working or not. So far the areas which have gained most money tend to be the areas where housing need is lowest. The areas that have lost most tend to be those where needs are greatest,’ she pointed out.
‘The Department has yet to demonstrate whether the New Homes Bonus works. Is it helping to create more new homes than would have been built anyway? Is it the best way for Government to use its limited resources to create more homes where they are needed most? Its planned evaluation of the Bonus scheme is now urgent,’ she added.
The committee makes a number of recommendations and calls for the scheme to be reviewed in the Spring of next year. These include ensuring that consistent, comparative information on local authorities’ progress in creating new homes and meeting housing need is readily available.
Permanent Secretary at the Department for Communities and Local Government, Sir Bob Kerslake, said he was disappointed by the report and outlines significant disagreements with its findings.
‘We have made very clear that our review of the New Homes Bonus is underway and the groundwork will be completed by Easter 2014 as we have always promised. The whole point of the New Homes Bonus, which the committee fails to recognise, is to recognise housing growth where it occurs, with money going where those homes are needed most,’ he explained.
‘That’s why we’ve committed £1.2 billion over five years towards this scheme, which the National Audit Office itself found has the potential to deliver up to 100,000 additional homes over 10 years,’ he added.
However Emma Reynolds, the Shadow Housing Minister, claimed that the report exposes the failure of one of the government’s flagship policies to boost house building.
‘Both the National Audit Office and the Public Accounts Committee have questioned whether this policy works at all, the fairness of its distribution and have slammed Ministers for failing to monitor whether the policy is delivering,’ she said.
‘This shambolic approach explains why the Government is presiding over the lowest level of homes built since the 1920s,’ she added.
