New Homes Bonus

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26 January 2011

The New Homes Bonus scheme announced last year is to be extended to empty homes. The proposed scheme has been generally well received by the industry. In outline, the idea is that central Government will pay local authorities a "bonus" equivalent to the council tax receipts for each new home provided in the local authority area for 6 years after that home is first occupied.

In theory, this should give local authorities an incentive to grant consent for family homes rather than flats or smaller units as larger homes will generate more council tax. However, there will also be an additional flat rate payment (£350 per annum is suggested) for each affordable home. The bonus will be calculated based on the national average council tax for properties in the same band, to avoid penalising local authorities who have kept their council taxes low.

It is anticipated that the bonus will be paid for new homes becoming available during the year 2011/12 and afterwards. The Government has earmarked £900,000 in the Comprehensive Spending Review to fund the bonus until 2014/15, but this is intended to be a permanent funding mechanism for the future. Local authorities will be at liberty to spend the money however they wish, it will not be ring-fenced for particular purposes. Clearly the existence of this source of funds when other income streams are diminishing is likely to influence decision making by local authorities as to development in their areas.
As well as the Bonus applying to previously empty homes which are brought back into use, the Department for Communities and Local Government has recently confirmed that it intends to curtail powers (introduced by the last Government) for local authorities to take over and let private homes left vacant for more than 6 months. So property owners need not fear that the Bonus will encourage councils to make aggressive use of these powers, which seem to have been applied sparingly - if at all - to date.

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