Government's New Homes Bonus scheme.

Minister of State, Rt Hon Grant Shapps MP, announced details of the Government's New Homes Bonus scheme on 17th February.

The scheme is designed to address the disincentive within the local government finance system for local areas to welcome growth.  Until now, increased housing in communities has meant increased strain on public services and reduced amenities.  The New Homes Bonus will remove this disincentive by providing local authorities with the means to mitigate the strain the increased population causes.  In addition, in doing so the New Homes Bonus should help engender a more positive attitude to growth and create and environment in which new housing is more readily accepted.

The Government says that the New Homes scheme will be a powerful, simple and transparent incentive.  Commencing in April 2011, the Bonus will match fund the additional council tax potential from increases in effective housing stock, with an additional amount for affordable homes, for the following six years.  It will ensure that the economic benefits of housing growth are more visible to the local authorities and communities where growth takes place.  Read more about the New Homes Bonus scheme.

The RICS Chief Economist, Simon Rubinsohn, comments:

"With housing supply still struggling to reach pre-recession levels, the RICS welcomes the focus the Government is placing on this issue.  However, the impace of the New Homes Bonus is likely to be limited and other measures are urgently needed to boost housebuilding."

"The Government's own impact assessment suggests that the New Homes Bonus is only likely to deliver an additional 14,000 homes each year for the next ten years.  This represents a drop in the ocean when the population is growing by roughly 220,000 households per year and the latest figures show there were only 102,000 housing starts in the whole of 2010.  In particular it falls well short of previous supply targets which estimated that between 240,000 and 270,000 new homes would be needed each year to match demand and help increase affordability. "

"Surveyors working in the residential market are sceptical about the impact of the New Homes Bonus.  Only 10% of RICS members responding to the January Housing Market Survey felt it would be successful in increasing the number of new homes in the market and close to 40% of respondents believed it would have no effect at all."

Read more about the RICS response.