The consultation document on the New Homes Bonus was published on 12 November. We commented briefly on how the funding was being delivered, as that had been the question on which we had focused earlier. The key point is clear.

“This policy redistributes a portion of formula grant on the basis of housing delivery.”

We estimate that when the policy is in full swing it be redistributing between 3 and 4% of Formula Grant.

The consultation paper invites views on a number of detailed issues about how the Bonus will operate. More interesting it provides some technical analysis of the effect the Bonus will have. On page 50 we find the Headline results:

“… a range of supply estimates from 8 per cent …  to 13 per cent.  under [the mid point  scenario] housing supply will be 11 per cent higher than the baseline from 2016/17 onwards. Over the initial 10-year period this is equivalent to 140,000 additional units for the mid-point scenario.”

14 000 homes a year extra

Taken together with the funding figures this  means that the bonus can be paid in relation  to around 140,000 homes in the first  year, but that only an extra 14,000 homes a year will result. This is significant but will only be part of the overall increase in housebuilding that we need.

Who wins, who loses?

The consultation document implies  that calculations have been made of the impact on all local authority areas (but it does not appear to make the full details directly available). Clearly some will get more money if they secure the building of significant numbers of new homes; areas of low growth will lose out, because they are seeing grant reduce to pay for the bonus. It will be difficult to determine whether the low growth areas are those with NIMBY attitudes (which the incentive is designed to change) or those where there is no demand for new homes. The consultation document says:

” …. demand is the more binding constraint.”

We have asked to see the more detailed analysis. As UKR we strongly support improving the delivery of new homes and it looks as though the Bonus will make a contribution to that aim. But if we are to rebalance the economy then there will be a need to change and improve the quality of housing in areas where demand has been weak so far.

Oh dear, local government finance distribution

The final picture will not be clear until the Bonus is set in the context of the Local Government Resource Review due to take place in the first half of 2011. UKR has argued consistently that a key role for government in a more localised policy framework is to ensure that the distribution of resources rebalances capacity. The Bonus is one factor: we will see what other factors come into play