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Today marks the end of the DCLG consultation regarding plans to transfer £400 million of New Homes Bonus money per year from Local Authorities to Local Enterprise Partnerships.
Our latest policy briefing sets out the key reasons why pooling the fund does not make sense, and risks undermining both the New Homes Bonus (NHB), and the Single Local Growth Fund (SLGF).
Most fundamentally, by pooling 35 per cent of the NHB nationally, and subsequently devolving responsibility for spending it to LEPs, the proposals diminish the incentive for local authorities to build more homes. Reducing the proportion of the bonus that is retained locally means that local authorities have less of an incentive to accept the construction of new homes in their area. The clarity and simplicity of giving a bonus for every new home to the local authority to spend within the communities directly affected stands to be replaced by complexity and opacity.
Pooling a proportion of the NHB also risks further compromising the Local Growth Fund. Of the £2 billion annual fund, half is already allocated. Given there will also be an expectancy to liaise with local communities in spending funds generated through the NHB, the level of discretion LEP areas will have when spending monies awarded from the Local Growth Fund will be further constrained.
Housing and growth are intrinsically linked, and should be considered together, but using the New Homes Bonus to top up the Single Pot is likely to undermine both policies.
Instead, local authorities should be encouraged to work together on housing and growth priorities through the offer of a pooling premium. This would be an extra payment on top of the bonus, meaning that if a local authority put £100 into the LEP growth fund, central government would add an additional premium (for example £35). This would maintain the integrity of the NHB whilst incentivising LEPs to work with local authorities to use their funds together, and link housing and growth policies.
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