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Follow the money
Housebuilder – June 2011

Is the New Homes Bonus really working? Mark Smulian reports on local authorities that have already benefited from the bonus and finds out whether they will spend the cash for more growth

"Follow the money", the source Deep Throat famously advised reporters investigating the Watergate scandal. The same advice might go to housebuilders wondering how best to make localism and the New Homes Bonus work for them.

Builders may have known anecdotally in the past how receptive different councils were to development, but now the distribution of the first year of the bonus - based on new building totals last year - makes it explicit that some are open for business and others less so.

The bonus awards councils money from the government equivalent to the council tax raised from each new home for six years, and more in the case of affordable homes. It thus provides councils with an extra source of revenue in these hard times as an incentive to encourage development. It also perhaps will act as a counterweight to the government's policy of encouraging public involvement in producing neighbourhood plans, something widely feared as a nimby charter.

angelic Islington

One place to which builders might "follow the money" is inner London, where most boroughs did extraordinarily well from the bonus. Islington gained 3.7 million from the first year of the bonus, equivalent to 22.2 million over six years. To put that in perspective, this 1,500 hectares urban sliver received more than Birmingham, England's largest local authority, and more than any other council except Tower Hamlets, which benefits from continuing developments in London Docklands.

James Murray, its executive member for housing, explains that Islington will devote the bonus to enabling housing associations to build homes for cheap social rent, as opposed to the "affordable" rents of 80% of market levels now favoured by the government.

"We are asking housing associations to work with us and use grant from the local authority - in the form of public land at discounted rates and capital from our new homes bonus - and in return build homes at social rents," he says.

Inner London is open for development but lacks sites for large up-market family homes for private sale. Builders have long coveted sites in southern England for those, but councils have been under pressure from existing residents to resist development. Again, the bonus awards tell the story of who is open to new build, and there is no obvious political pattern to this.

Conservative-controlled Hart District Council, a semirural swathe of north-east Hampshire, saw a mere 39 new homes last year, the lowest total in England. Yet Tory North Dorset District Council, with 225,000 available from the bonus, recognises a need for new homes.

Its leader Peter Webb says: "There are some people who will always react negatively to development, but others are getting the message that this is about the future of their communities and that they will not have a future if the area just becomes a retirement haven for the rest of the country with a large number of elderly people and the services needed to support them.

"We now have the opportunity to plan for what we need economically and demographically and that means development that is required to deliver job creation and we will want it linked to affordable housing and open space."

North Dorset will try to concentrate development in market towns and some larger villages. Webb concedes that demanding open space from builders might sound a strange priority in a rural area but explains "we have plenty of farmers' fields which are nice to look at, but hard to walk on, but we have very few parks".

He doubts though that the bonus will pay for sufficient goodies to overcome public hostility to development by itself.

"It's useful but when you look at the scale of cuts we have had it is a small plus in a sea of large minuses, though the argument that we could use it to restore some services may be a useful one."

sustainable cambridge

The Liberal Democrat stronghold of Three Rivers - around Chorleywood in Hertfordshire - saw just 40 additional homes in 2009-10, but the party also controls Cambridge City Council, which gained 786,000 from the bonus.

Patsy Dow, Cambridge's head of planning, says the city will build 14,000 homes by 2031, having stuck to the old regional spatial strategy total.

But it is determined to do this by creating sustainable new neighbourhoods, most of them on released green belt land, some of which straddles the boundary with neighbouring South Cambridgeshire District Council.

Dow explains: "We will use the New Homes Bonus to replace funding that would have come from being a growth area to pay for people who will work, not justin planning, but right across the piece to ensure our new neighbourhoods are mixed sustainable communities.

"There is a history of growth here and the community has been very adult about the direction of that growth and how to respond to it."

Cambridge seeks a mix of housing, with a policy of requiring affordable housing at 40% in developments of 15 or more homes or on sites of 0.5ha or larger.

Another district that expects the bonus to smooth the path of development is Uttlesford, based around Stansted airport.

Its chief executive John Mitchell, a former planner, says the area has been meeting its old housing targets and has seen "no collapse in the housing market and we expect that to continue for years yet". It has released four large greenfield sites near Stansted and Great Dunmow and elsewhere seeks piecemeal development in towns, with 40% affordable housing.

"The expectation is that the new homes bonus will be used by being targeted to the areas with the greatest development growth so they will see the benefits," Mitchell says."There are always those who resist development, but I think we are seeing a sea change in attitudes because in villages people see their post offices and shops going and make the link between that and the presence of a population that will sustain those services and realise they need more people there."

One district that shows the contrasting pressures of the bonus and local planning is Forest Heath, based around Newmarket. On the face of it, with 530 new homes last year and 562,000 from the bonus it is building fast for a small rural area.

But planning manager Marie Smith explains that it historically missed building targets and has met them recently only because of the 1,600 homes Red Lodge development, which is coming to an end.

"There is a justified housing requirement for the district which needs to be balanced against the protection of the environment - including large areas of flood plain and environmental designations," she says. "Our next step is to begin work with our communities to decide where development should go now that it is a local matter and not something that people see as being imposed on them from outside in a regional strategy.

"The council has not yet decided how to use the New Homes Bonus but it could be used to improve or provide amenities in areas where development takes place."

With such varied attitudes among councils it is small wonder that builders are probing localism cautiously. Nigel Bell, land director of Yuill Homes, says: "I'm still not sure that anyone really knows how this will work as localism seems more a philosophy than a set of rules. We have always taken localism seriously and engaged with communities and I think we will all have to do more of that."

There is also the problem that council planning and finance directors may see the bonus differently.

Bell notes: "Our experience with the New Homes Bonus is that we've found planners very reluctant to consider it. They want to stick to the planning agenda and not get involved with considerations of the bonus so I think it may take pressure from higher up councils on them to take the bonus into account."

bonus imbalance

Paul McCann, group planning director at Banner Homes, fears the bonus will, perversely, benefit the councils with which housebuilders already have the least difficulty. "The bonus will be quite significant for councils, but less so in well-heeled areas that have a good local tax base, and more so in less well-off areas in need of regeneration," he says.

"I can therefore see it being least effective in the areas in which builders are most interested, because although builders are interested in regeneration their main focus is areas with a strong demand, which tend to be the richer shire districts."

He says Banner has long been involved with communities in pre-application discussions and meetings and expects that work to become more important particularly once the government decides at what threshold the Localism Bill's "duty to consult" on developments will kick in.

Others are waiting and watching to see how councils react to the bonus. John Tutte, Redrow's group managing director, says: "It is far from clear how local authorities are going to react to both the Localism Bill and the financial incentives on offer.

"We do not expect the situation to become clearer until new councils and committees have settled in and the bill approaches final approval."

Localism is a brave new world. In some places, it may even work for both builders and councils.