New Homes Bonus mired in controversy

Local councils will miss out on millions of pounds of government funding through the New Homes Bonus by failing to build new homes.

The local authorities have now learnt how much they will receive this year for the new homes they built in 2009/2010.

The bonuses match six years worth of council tax.

The Home Builders Federation has revealed that councils that have scrapped development plans will miss out on huge amounts, at exactly the same time as town hall funding is being cut. While some will gain over £4m a year, others will get nothing.

HBF executive chairman Stewart Baseley said: “The figures highlight the potential income local authorities can generate by building the new homes their areas need. In these austere times, with budgets being cut across the country, this money will prove invaluable.”

According to the HBF, Leeds City Council – which has scrapped plans for more than 30,000 new homes – could lose out on £27m a year in bonus payments over the six-year period, losing £4.5m this year alone.

However, Tower Hamlets will get £4.28m in bonus payments for the homes it built in 2009/2010.

At the other end of the scale, Hart Council in Hampshire will get nothing, says the HBF. Only ten homes were added to its stock, and it had a net reduction of 39 homes. According to the HBF, Hart should be building 400 homes a year and if it were, it would be getting £3.5m in bonuses.

Separately, a row has broken out in the Commons between housing minister Grant Shapps and his shadow Alison Seabeck.

Both accused each other of not understanding how the new homes bonus will work, after Seabeck claimed that London and the south-east will receive significantly higher payments than the rest of the country.

Shapps rejected this, but Seabeck got the House of Commons library to do some number crunching. This showed that because councils in the south-east build more expensive houses, which are in higher council tax bands, they will get more bonus money.

The sums show that councils in the north-east will on average receive around 25% less than councils in London.

The figures show that for every 1,000 homes built, a London council would receive £9.1m, while an authority in the north-east would get £6.8m.