UK government announces annual New Homes Bonus allocations

The largest grant, of £24.8 million, will be paid to the London Borough of Tower Hamlets. Other London councils featuring in the list of the ten largest grants include Hackney, Islington, Southwark and Newham. 

The New Homes Bonus scheme is aimed at encouraging local authorities to grant planning permission for new homes in their areas by paying a bonus based on the amount of extra council tax revenue raised on each new home for six years. Councils are not obliged to use the bonus to fund housing development. 

Planning expert Iain Gilbey of Pinsent Masons, the law firm behind Out-Law.com, said "The bonus is funded largely from a deduction from the formula grant with the result that some areas, generally those which are less attractive to housing developers, will suffer a net loss, whilst others will gain. DCLG has estimated that by 2014/15 about three quarters of authorities would be better off. The picture in London is mixed with some of the highest positive and negative effects." 

When the scheme was launched in 2011 the DCLG said its aim was to provide an additional 140,000 homes over a 10 year period. The DCLG announced in February that a total of almost £3.4 billion had been allocated between 2011 and 2016, rewarding "the delivery of 700,000 net additional dwellings and over 100,000 long-term empty homes brought back into use". 

Gilbey said: "A report by the National Audit Office in 2013 concluded that estimates of the potential increase in new house building attributable to the New Homes Bonus were unreliable, although it found some evidence that it had given authorities resources to assist in tackling empty dwellings. The National Audit Office called for an urgent review to ensure that the bonus successfully encourages much needed new homes."