Housing

Frequently asked questions about the New Homes Bonus - Updated 1 December 2011

How does the New Homes Bonus work?

The Bonus is based on the council tax of additional homes and those brought back into use, with a premium for affordable homes and paid for the following six years. Details including scheme design can be found on the New Homes Bonus homepage.

What funding is available for the New Homes Bonus?

The Bonus commenced in financial year 2011-12. We set aside almost £1billion over the Spending Review period with the Bonus fully funded in year 1. For each of the years 2012-13, 2013-14 and 2014-15, £250m has been allocated to the New Homes Bonus from this Department's funding, and funding beyond these levels comes from formula grant. 

The first £250m was allocated through the spending review. We also topsliced £176m from 2012-13 formula grant, based on a central estimate of housing supply. The provisional allocations have exceeded our initial budget estimates by around £6m. In order to manage the cashflow, the Bonus will therefore be paid in 13 monthly instalments commencing in March 2012. The additional £6m will be recouped from local government resource in 2013 - 14

A provisional formula grant settlement for 2012-13 can be found at: www.local.communities.gov.uk/finance/1112/grant.htm (external link) - this already takes account of the funding set aside for the New Homes Bonus - £176m.

What funding has been provisionally allocated for 2012-13 (Year 2) for the New Homes Bonus?

In 2012-13 (year 2) the New Homes Bonus provisional allocations will total £431m for English local authorities - some £200m for the second year 1 instalments and £231m for the first year 2 installments.

When will local authorities receive their payments?

We wrote to local authorities Leaders, English members of Parliament and chief executives on 1 December 2011 to notify them of their provisional allocations for 2012-13. Once final allocations are announced in early 2012 payments will be made monthly across 13 months direct to English local authorities. The first monthly payment will be made in March 2012.  

Final allocations will be issued alongside the Local Government Finance Settlement. This will enable local authorities to include the grant in their annual budget setting process.

Where can I see my local authority's provisional allocation for New Homes Bonus?

Local authorities can view provisional allocations on the 'Written Ministerial Statement' or alternatively on the calculator download which is also on the New Homes Bonus homepage.

Local authority Leaders, all English Members of Parliament and Local Authority Chief Executives have been written to on 29 November 2011 with their provisional allocations. Copies of these letters can also be found on the New Homes Bonus homepage.

How is the provisional allocations made up?

The 2012-13 provisional total allocation is made up of some £200m for the second year 1 instalments and £231m for the first year 2 instalments.

The First Year 2 provisional instalment is based on an increase of 159k in properties on the valuation list, a decrease of 22k long-tem empty properties and 61k new affordable homes (including additional traveller site pitches). The first year 2 instalments will be paid for the following six years.

Who can I contact if I have a query?

Queries on specific data or any other New Homes Bonus issue  should be emailed to the New Homes Bonus team at : newhomesbonus@communities.gsi.gov.uk. The deadline for representations on the provisional allocations is 30 December 2011.

How does my local authority make a representation on the allocations announced or data used?

A: We have written to local authority Chief Executives with details of making representations (download data protocol).  Otherwise please email the New Homes Bonus Team at
Newhomesbonus@communities.gsi.gov.uk

Will the funding be ring-fenced for housing?

No, the New Homes Bonus will be paid through section 31 of the Local Government Act 2003 as an unringfenced grant. Local authorities and their communities will have the freedom to spend New Homes Bonus revenues according to local wishes. There are already good examples of authorities using the Bonus in a variety of ways. For example in consultation with local communities, Wychavon have developed a protocol for spending the New Homes Bonus, The aim of which was "…to ensure that the economic benefits of growth are returned to the local authorities and communities where that growth takes place". For further examples of how the benefit can be used to promote growth see the new Bonus Bulletin - will be made available from New Homes Bonus homepage shortly.

Why is the funding not ring-fenced?

Local authorities are best placed to understand the barriers to housing and the needs of their local communities.  They decide how to spend the funding, taking into account local priorities.

The Spending Review 2010 set out that the Government are ending ring-fencing of all revenue grants from 2011-12, except simplified school grants, and a new public health grant from 2013.

The removal of ring-fencing from local government grants - gives councils freedom over the money they receive - provides significant financial autonomy. This allows local authorities to work with their residents to decide how best to make their spending decisions. By lifting the restrictions on how local government spends its money the Government have facilitated a major step towards devolving greater power.

Taking money from Formula Grant is unfair to disadvantaged areas

Under the provisional 2012-13 Local Government Finance Settlement we transferred £176m from formula grant to fund the New Homes Bonus, but we have ensured protection for councils through the Transition Grant, which guarantees that no authority will receive a reduction in its spending power of more than 8.8 per cent in both 2011-12 and 2012-13.

How long will the New Homes Bonus last?

New Homes Bonus is intended to be a permanent feature of the local government finance system.

How will the local government resource review impact on the New Homes Bonus scheme?

The Government introduced the New Homes Bonus to incentivise housing supply in April 2011. We have also been developing proposals to deliver effective incentives for local authorities to promote business growth. We have set out proposals this summer that will replace the existing Formula Grant arrangements to move to a process whereby local authorities keep at least a proportion of their business rates. Our proposals make clear that we will continue to fully fund commitments arising from the New Homes Bonus through a top slice of the business rates income.

Will affordable homes be included?

It is crucial that we ensure that there is a good balance of market and affordable homes so we want to incentivise the role that local authorities can play in providing the right balance to meet the needs of local people. For the first time this year we will pay a premium of £350 (£2,100 over 6 years) for each new affordable home. This is in addition to the Government's commitment in the Spending Review to invest £4.5bn in affordable housing over the next four years, which will deliver up to 170,000 new affordable homes.

How have the number of affordable homes be calculated?

We have used the Department for Communities and Local Government statistics on gross affordable housing supply, which are published annually, to calculate the affordable homes enhancement. Allocations for 2012/13 are based on 2010/11 data which was published on 5 October 2011. This data is in line with the scope of Planning Policy Statement 3 (PPS3). The Statistical Release is available at http://www.communities.gov.uk/publications/corporate/statistics/affordablehousing201011 and detailed tables at http://www.communities.gov.uk/housing/housingresearch/housingstatistics/housingstatisticsby/affordablehousingsupply/livetables/ .

The affordable supply statistics have been updated for some authorities to reflect subsequent revisions to their Housing Strategy Statistical Appendix return.

The affordable supply figures are supplemented by data on additional affordable residential traveller pitches constructed between July 2010 and July 2011. This data was published on 17 November 2011 at
http://www.communities.gov.uk/publications/corporate/statistics/caravancountjul2011

A technical note Gross supply of affordable homes: Data sources and methods can be found on the New Homes Bonus homepage.

What happens if council tax levels change?

The scheme design paper sets out how the national average council tax rate is calculated for each band. The grant is then payable on each eligible property for the following six years at the same rate. We will review the rate of council tax annually in respect of eligible properties completed in future years. There was a small increase this year of 11p due to parish precepts which were not included in the council tax freeze.

How long is a property empty before it becomes eligible for new homes bonus?

As set down in the Council Tax (Exempt Dwellings) Order 1992, SI 1992/558), properties that are 'unoccupied and substantially unfurnished' are exempt from council tax for up to six months
www.legislation.gov.uk/uksi/1992/558/contents/made (external link).

'Substantially unfurnished' is not defined in the legislation; many local authorities regard a dwelling as substantially unfurnished if there are insufficient furnishings to enable someone to live in the dwelling, but in any case judgment has to be made on each individual case.

After six months the property becomes defined as 'long term empty' and therefore subject to council tax. See Council Tax: discounts and exemptions (external link).

We have a number of empty homes awaiting demolition. Will this affect us?

Authorities will not be penalised for demolishing long term empty properties. Where there is a long term property recorded on the council tax base form which is subsequently demolished and replaced with a new property. Grant will be paid on the new property.

How are demolitions treated in the New Homes Bonus?

Local authorities will be paid a bonus for an increase in net effective stock - either new property or empties brought back into use. Therefore if an authority demolishes a property and rebuilds it, then the authority has no net change in effective stock.

What happens if we demolish more homes than we build in any given year. Will this count against us the following year?

No. Negative changes in effective stock will not be carried forward. Each authority will start from a zero base in each subsequent year.

Will traveller sites be included?

Under New Homes Bonus, traveller sites will receive equal treatment. They will be subject to the same planning rules that everyone else must abide by and will receive the Bonus where they are valued for council tax. Additionally, publicly funded or managed pitches and other appropriate products offered at below-market prices attract the additional affordable homes premium. Data on affordable traveller pitches can be found at http://www.communities.gov.uk/corporate/publications/statistics

How will New Homes Bonus work in two tier areas?

For the incentive to be powerful, it must be strongest where the planning decision sits - the lower tier in two tier areas. However, in two tier areas, we recognise the role of the upper tier in the provision of services and infrastructure and the contribution they make to strategic planning. The bonus is therefore split 80 per cent to the lower tier and 20 per cent to the upper tier.

However, this is a starting point for local negotiation. Every development is different and will need different services to support it. Local authorities and local communities are best placed to negotiate these to meet the needs of local neighbourhoods. In many cases this will involve advanced planning with local authorities.

In London 100 per cent will go to the London borough.

Will the New Homes Bonus be paid on purpose built student accommodation or similar types of purpose built clustered accommodation?

Any new homes built and properties brought back into use which are recorded in line 1 of the Council Tax Base form will be included in the bonus calculations. This data will include student or other purpose built accommodation as reported by the Valuation Office. At this stage the Government does not propose to exclude student accommodation or similar purpose clustered accommodation including sheltered homes for the elderly.

When will a new home or property trigger the award?

Once a new home is recorded on the Council Tax Base form it will become eligible for New Homes Bonus grant awarded the Bonus. A snapshot of this data is taken in October each year and the Bonus is paid in the following financial year. The Bonus does not take into account planning permissions or other planning processes.

Will homes built after a planning appeal be eligible for the New Homes Bonus award?

Yes - all new homes or properties recorded in the council tax base form and which come under the New Homes Bonus grant calculation will be eligible for the bonus. Therefore all new homes or properties eligible for New Homes Bonus would have gone through the planning process including appeals.

Will district and parish councils benefit from the New Homes Bonus proposals?

For the incentive to be most powerful, it must be strongest where the planning decision sits. In two tier areas this is the lower tier. The bonus will therefore be split 80 per cent to the lower tier and 20 per cent to the upper tier.

However, this is a starting point for local negotiation. Every development is different and will need different services to support it. Local authorities and local communities are best placed to negotiate these to meet the needs of local neighbourhoods. Parish and town councils are encouraged to negotiate with local authorities to ensure that the benefits of growth are reaped by the communities themselves. Wychavon have developed a protocol, whereby up to 40 per cent of the funding is spent by the community where the growth is taking place. 

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