There is virtually no elected official that would deny that the UK is facing a housing crisis. Since 1997, the UK hasn’t built anywhere near enough houses, and that has caused the cost of housing to skyrocket: pricing home-ownership well out of the reach of ordinary Britons.
Local authorities generally don’t like new housing, and who can blame them? It puts pressure on public services and it can undermine the character of local communities.
However, new housing is a must, and achieving a change in the politics of housing, so that local authorities feel as though housing benefits their areas, is a top priority.
In 2011, the Conservatives introduced the New Homes Bonus, under which it has paid local authorities a grant for each new home built or unused home brought back into use. The Government has distributed £6bn from this fund, with Camden receiving £7.6m from it last year.
However, the long-term impact of this is limited. While the New Homes Bonus is not required to be spent on capital projects, it is limited in duration to five years (being reduced to four). As such, it is rarely treated as sufficiently permanent to be used to provide new services.
This should change.
Instead of giving councils a New Homes Bonus for a few years, it should be a permanent, annual payment. And it should be increased. If local authorities received, say, £800 every year for each home they built, there would be a rapid realignment of incentives for councils.
Restoring weekly bin collections in Camden would cost £800,000 – using the above figure, this could be done, permanently, by Camden permitting 1,000 new homes to be developed: about the number built each year. If two million extra homes were built, this would cost £1.6bn a year: a small fraction of the government’s budget and a small price to pay to solve the housing crisis.
The New Homes Bonus is brilliant, because it provides an incentive to councils to build while not costing the government any money overall. After all, the councils would be free to spend the extra cash on whatever services they deemed suitable.
And they would be free to decide for themselves what their priorities were: preventing development – which comes with limited financial upsides and many social and political downsides – or more services?
Instead of spending money on Help To Buy to increase the viability of developments, the government should look at how it can incentivise local government to build more. Devolving taxation is a difficult issue, but extending and enhancing the New Homes Bonus would be a great way to do it.