NHB - good news and bad news

The government's consultation on New Homes Bonus contains both good and bad news for empty homes practitioners. The good news is no news: there is no proposal to remove the reward for reducing the number of long term empty homes. The bad news is just about everything else in the consultation document, the main effect of which will be to reduce the level of reward and thus potentially reduce the commitment to empty homes initiatives.

Points to note

The new arrangements, whatever they are, will not be introduced before the 2017-18 financial year, so there is a minimum of a year's grace.

As mentioned in an earlier story, reductions in NHB also represent a transfer of funding from districts to counties in two-tier areas; the effect on districts is disproportionately large relative to their overall budgets compared with single-tier authorities (London boroughs, Metropolitan Boroughs, unitaries etc). At various points the report talks about making money available for social care: it is the split between districts and counties that is mainly at stake here as in any unitary authority the NHB received is already "available" for social care.

Proposals

Reducing the period of the award

The main proposal is to reduce the period of award from six years to four years. As the current level of award has now reached £293million for the 2015-16 year, boosted by the growth in house-building, two years' worth of savings could amount to nearly £600million of the £800million savings target. However, initial savings would be less, as the earlier years to drop off are at a lower level of reward.

The government is offering variants to this approach, such as a stepped reduction from 6 to 5 to 4 years rather than reducing directly from 6 to 4 years. It is also inviting comments on whether the period of reward might be reduced to 3 or even 2 years.

Although local authority empty homes pracititioners might be adversely affected by even greater reductions in NHB, we need to bear in mind that the NHB system is one of winners and losers. The less the amount of NHB, the less you can win - but the less you can lose, too. Authorities reviewing the impact of the other proposals described below may well want to cut their probable losses by supporting the lesser reward (and who could blame them?)

As already noted, the effect of a lower NHB reward will be to make investment in empty homes initiatives somewhat less attractive, when looked at solely from the point of view of NHB and without taking into account the many other social and economic benefits of bringing empty homes back into use.

Amount of reward per dwelling

Without making specific proposals, the government is inviting views on the quantum of reward per dwelling. Currently an identical house in different parts of the country can produce substantially different amounts of reward depending on the banding. A 3-bed property in central London could produce double the NHB compared with a similar property in an area of lower demand. This is manifestly unfair and EHN will probably suggest - as we did in the initial consultation in 2010 - that the government use a flat rate of reward per dwelling across the country, ignoring bandings altogether: this might be the national Band "D" average.

Reductions for failure to produce Local Plans

The proposal here is to punish local authorities that have not produced Local Plans, by reducing or withholding their NHB. In principle, Local Plans appear to be a sound concept, allowing local communities some power to shape what happens in their area, even though that power may be constrained by external policy requirements and filtered through layers of technical and political consideration. It is difficult to resist the view that local authorities should have Plans in place, despite the expense of producing them.

Most authorities do now have a Local Plan or have submitted one, so this is targeted at a minority of councils. The government is proposing a number of variants about how they penalise authorities according to the current status of the Plan. But whatever penalty might be brought in - and one of the proposals is for 100% withdrawal of NHB - it would hit local people not "local authorities". The gold-plated pensions of those in the higher management tiers most likely to bear some responsibility for decision-making (or non-decision-making in this case) will not be affected. Rather than punishing the innocent, the government could simply introduce a statutory requirement to produce a Local Plan within a stated time frame, with the fall-back option of the Plan being produced by an independent third party in the event of non-compliance, costs to be borne by the non-complying authority. If a Local Plan is really needed this would be the appropriate option rather than financial sanction.

Further considerations to be borne in mind, too complex to be considered in detail here, are the vagaries of Local Plan production that can sometimes defeat the best intentions of local authorities (changes in government policy, judicial reviews and court cases, etc); the relative difficulty of judging exactly what cutoff dates should be applied in respect of the status of a Local Plan; the fact that the decisions about Plan-making are ultimately made by elected representatives (who don't get the gold-plated pensions either); and the fact that there would be a period of grace before the measure would take effect.

Reduced reward for homes allowed on appeal

The proposal here is again a withdrawal or reduction of the amount of NHB where planning permission for homes is only granted on appeal. The reduction would be based on the number of dwellings in the appeal, not the number of homes eventually built, but there would be a delay (of unspecified duration) between the appeal being granted and the reduction in the amount of NHB. The Planning Inspectorate already keeps records of dwellings for which permission is granted on appeal, so the necessary information is readily available.

In reviewing whether some or all of the NHB should be withdrawn, the consultation gives a welcome acknowledgement to the impact on residents, noting that "there is a limit to the extent to which local people should be penalised as a result of poor decisions made by their local planning authority". It also records that planning appeals can cause the appellants to incur delay and costs. But it does not mention that planning inspectors already have the power to award costs where the planning authority has acted unreasonably: in very many cases inspectors choose not do do so, which suggests that in those cases the planning authority's view of the application was defensible, even if the balance ultimately tipped the other way. Nor does the Consultation document seem to allow for the possibility that the Planning Inspector will, in granting an appeal, sometimes impose conditions or requirements on a developer that reflect aspects of the local authority's grounds for refusing permission in the first place.

People who value good democratic institutions are likely to have major reservations about this proposal. New Homes Bonus has always trailed the whiff of corruption, the hint of bribing local authorities to grant planning permission. DCLG's study of New Homes Bonus, taken with the research materials that supported it, documented the situation that, in practice, the NHB should have no meaningful impact on the decisions of planning committees as it should not be a material consideration in the planning process. Planning committees and officers deciding planning decisions appear to have acted accordingly. It now appears that our councillors' disappointing reluctance to accept the New Homes Bribe means that the latter requires augmenting with a regime of punishment, one which developers may be able to manipulate to encourage local authorities into submission.

In some quarters this particular proposal may be regarded as a form of "financial terrorism" against local authorities: perhaps an appropriate reaction by our goverment would be to seize those responsible and render them forthwith for re-education at Guantanamo Bay: there, they could be detained for an indefinite number of years by the world leaders in democracy ,the US government, without charge or trial, but with ample opportunity to "sharpen their focus" on what it means to live in a democratic society governed by due process. On balance, however, this is an unlikely scenario and not one that EHN itself would be suggesting.

Removing deadweight

This proposal involves introducing a threshold so that rewards are paid not for each net additional dwelling, but only for those net additions over an agreed threshold, which the government proposes would be 0.25% of the dwelling stock. This would lower the amount of NHB across the board; but it would hit the authorities with low demand or little capacity for newbuild disproportionately. On average, one would expect this proposal to hit authorities where empty homes successes form a larger percentage of the NHB reward, as the overall net additions tend to be lower in those authorities. This undermines some of the claims to "fairness" reflected in the inclusion of empty homes in the first place: it is giving with one hand and taking with the other. The poor will get poorer. EHN can be expected to strongly oppose this suggestion.

In event of success, break glass and press alarm

The government is concerned that if there is too much housebuilding NHB may go "over budget". As NHB is top-sliced from the local goverment finance settlement it could not in any normally-understood way, go "over budget". All that would be happening would be that more money would be distributed as NHB compared to the balance of funding. If earning more NHB was supposed to be responsible for the surge in house-building then it would seem to be fulfilling its purpose so it would seem counter-intuitive to reduce it: reducing the reward could be expected to reduce the incentive to earn the reward. Nevertheless, that is the goverment's proposal, namely to increase the baseline, or threshold above which NHB would start to get paid. Modelling would be required to really understand the likely effects on levels of reward.

Alternatives

It remains a frustration for the Empty Homes Network that even with the proposed reductions in NHB, it would be cheaper still - and far more effective - to develop a proper national empty homes initiative with the money currently awarded for bringing empty homes back into use. So long as solutions are held to lie in the market, even where it may reasonable be considered to have failed, as with long-term empty homes, the chances of a systematic, government-led initiative to tackle empty homes are non-existent, as Brandon Lewis's response to our letter to Greg Clark demonstrated. In these circumstances, the New Homes Bonus is an essential support for our work.

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Comments from Members are welcome. A forum post has been added where EHN Members can discuss the shape of our consultation response.

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