When the New Homes Bonus was introduced it was made clear that it would eventually become "revenue neutral" by virtue of being top-sliced from formula grant. This would produce a system of winners and losers where the winners would gain at the expense of the losers. But for the first four years of the scheme the government provided about £950million of additional funding to soften the impact and reduce the number of losers.
The National Audit Report on New Homes Bonus[see Note below] left open the question of similar support in future years (though this was surprising as there has never been anything to suggest that the government was considering such an option). However, the Spending Review did not include any provisions for further funding: the government is sticking to its original plan.
So from 2015-16 onwards we will have the full "winners-and-losers" model in place. In those areas where it will be hard to earn New Homes Bonus - eg because of low demand or lack of development land - this may mean significant revenue cuts. (Indeed, the NAO report highlighted that the government had failed to model this or provide any kind of impact assessment.)
But in addition, the top slice of £400million (c.35%) from NHB to fund Regional Growth Funds means that only the very top performers in producing net dwelling growth are likely to see any actual "bonus": for the rest, chasing delivery of net dwellings to earn NHB will become a competition to see who loses the least.
This does not undermine the underlying case for supporting empty homes initiatives to earn NHB - the drivers are still the same. But it might change the arithmetic involved in spend-to-save calculations. Practitoners will need to emphasise and document the positive outcomes they produce. The EHN Monitoring Guidelines remain the only standardised methodology for doing so. They also remain up for refinement if needed.
Note: Figure 6, page 23 of the NAO report. Note 1 to the table says:
The mix of grant and redistribution of Formula Grant from 2015-16 will be decided at the next spending review.