Another inglorious failure

It’s not that we like being proved right, especially when things in housing are so dire, but the Financial Times’ analysis of the Government’s New Homes Bonus leads us automatically into ‘we told you so’ territory. Mind you, analysis of most other Government policies – ‘affordable rent’, ‘help to buy’, ending regional planning, and so on – tends to lead to similar conclusions. But there are few policies where more has been claimed and less has been delivered than the NHB – and the likely outcome was not only predicted by Red Brick but also by former Labour Housing Shadow Alison Seabeck way back in April 2011.

The scheme itself was meant to be a reward to councils that encouraged housebuilding, who would get a subsidy equivalent to the council tax income on the property for six years after it was built. There was some Treasury funding at first but the main method of funding the plan was to ‘top slice’ normal council grants. There was therefore always going to be a redistributive effect from some councils and to others. Given that a lot of development is a windfall activity (some councils have to do nothing to see development in their areas, others have to struggle hard to get any) it was always likely to be unfair, a reward for the lucky.

Authors Jim Pickard and Andy Sharman (registration required) conclude that the NHB ‘has shifted cash from poor northern councils to rich areas in the south with little evidence that it has boosted homebuilding.’ They quote the National Audit Office finding that there is ‘little evidence’ that the bonus has change councils’ behaviour in terms of planning, contradicting ex Minister Mark Prisk’s claim that it would bring about ‘at least 400,000 additional homes’.

According to the authors, NHB has cost £2.2 billion so far – which happens to be 50% more than the annual affordable grant programme. For that money, to justify itself the policy should be delivering major improvements in housing approvals and delivery. It plainly isn’t.

Although the new Minister, Brandon Lewis, demonstrates an ability to say the blindingly obvious – ‘Areas building the most homes receive the most money’ he said – the FT’s analysis of winners and losers shows a strong redistribution away from the most deprived councils, filling the coffers of the least deprived. Funnily enough, the main losers are Labour councils and the main winners are Tory and Liberal councils.

The reasons are obvious – and were obvious when the policy was introduced. Housebuilding tends to be focused in those places where the economy is strong and housing demand is high – builders only build what they can sell. The building of these homes would have happened anyway and was not incentivised by the Bonus, nor has it changed council behaviour. In that sense it is a complete waste of money and an unnecessary punishment visited on poor areas.

And think what might have happened if the money had instead been spent on providing grant for genuinely affordable social rented homes.

 

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