Group of councils calls for end to New Homes Bonus

The group, which is made up of large urban councils across the country but outside London, has called for an end to the New Homes Bonus, which was introduced in 2011 to encourage councils to grant planning permission for new homes in order to receive additional funding. 

It rewards local authorities for net additional homes added to the council tax base.

But SIGOMA argues that the scheme has not generated the housing where it is needed, which has resulted in funding being “top-sliced” from the revenue support grant. 

“Funding from the [New Homes Bonus] has disproportionately gone to already wealthy authorities, disadvantaging more deprived authorities who would have received that funding had it been distributed based on need,” it said. 

The government recently announced that councils will be able to keep 100% of Right to Buy receipts in a bid to increase housebuilding, but only for two years. 

SIGOMA is asking for permanent amendments to the scheme. 

It is asking for £10bn in funding to go towards committing to “adequate” funding to uplift all housing to Energy Performance Certificate Band C. 

The group is also asking for new powers to force developers to stop ‘landbanking’.

The manifesto says: “Planning departments are not to blame for a lack of housebuilding - the Local Government Association (LGA) has estimated that there are currently one million planning permissions going unused. 

“Between 2009-10 and 2021-22, planning permission was granted to around 3.3 million housing units but only 2.2 million housing units were still completed in that time. 

“Developers hold on to land whilst it increases in value, leaving the land empty and undeveloped. New powers, such as an undeveloped land tax, could encourage the building of new homes and increase development, whilst providing local authorities with revenue where ‘landbanking’ is taking place.”

Along with changes to housing policy, SIGOMA has asked for reform of local government finance. 

According to the manifesto: “Councils now receive £4.58bn less in grant and retained rates than is raised through the business rate scheme. In 2013-14, they received £4.93bn more – this is a reversal of £9.51bn. 

“The proportion of funding from government by grant has reduced while the amount raised from local taxes has increased. 

“This has benefited the wealthiest areas who rely less on grant funding and who raised more from council tax, business rates and other growth-based local funding sources. 

“The structures that support a fair distribution of funds raised through taxation have been replaced by ones that tend to reward high-value housing stock and a large and thriving business rate base.”

It has asked government to publish data showing all non-ringfenced council revenue funding, including business rate growth, “so that councils and the public have a clear idea of how much revenue is available”. 

SIGOMA also urged government to restore full distribution of business rates. As it stands, councils only retain 50%. 

On levelling up, the group said the government must end the competitive bidding for funding pots that “risks distributing funds to councils with the slickest bids, rather than to councils that need support the most”. 

It said funding must target the most deprived councils. 

Sir Stephen Houghton, chair of SIGOMA, said: “As political parties step up their canvassing ahead of the local elections this week, households on every street are crying out for a government and local representatives that can provide a promising vision for the future. 

“Today’s announcement lays out a clear manifesto that will help support councils across the country that are on their knees after 13 years of continuous cuts and provide them with the financial support to invest in their local communities and help generate long-term prosperity. This manifesto is truly levelling up in action.” 

The Department for Levelling Up, Housing and Communities has been contacted for comment.