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Council rewarded for empty homes progress

December 12, 2012

The government announced on Monday the amount of New Homes Bonus to be provisionally paid to each local authority. It appeared to be a rare piece of positive news for councils, but when you analyse the figures they show nationally a low level of house building and the re-distributional affect of the New Homes Bonus is not positive for many North-East Councils.

With regards house building across the country, the figures show that new home starts are low. At Newcastle Council we recognise the need for new houses. The councils Fairer Housing Unit is very much open for business. The figures showed that our performance was good, especially when compared to other local authorities. We had 681 units that qualified for New Homes Bonus, a significant achievement considering that during the period there were many pre-planned demolitions which were taken off our figure. Our success was also down to the number of empty properties that were brought back into use. Over 411 empty homes were brought back into use, making us one of the top performing local authorities in that regard. Our achievements though would have been greater but for demand issues, the disproportionate cuts to funding for new house building and the decision to remove Bridging Newcastle Gateshead funding worth around £20m a year.

Sadly the funding for the New Homes Bonus is, on the whole, not new investment. The majority of the New Homes Bonus has been funded via a top slicing of local authority revenue budgets. Next year, £411m of the £661m to be awarded will be top sliced from local authorities. This means that over time it is likely that money will transfer from more deprived authorities to rich authorities as the amount of bonus received is based largely on the level of council tax, and richer authorities have a higher council tax base. For example some local authorities built fewer units, but received more money than Newcastle. To pay for the New Homes Bonus, it is estimated that by 2018, £17m will be taken from Newcastle Councils revenue formula grant, with an estimated bonus of £6m, giving a net cut of around £11m. Concerns over how the New Homes Bonus is funded are additional to the concerns of further spending cuts as a result of the Autumn Statement, and whether these will have a further disproportionate affect on deprived local authorities.

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