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New Homes Bonus a ‘financial risk’ to councils – NAO

The Department for Communities and Local Government (DCLG) is not adequately monitoring the £1.3bn New Homes Bonus, the National Audit Office (NAO) has warned.

The bonus, paid to local authorities up to 2013-14 aims to deliver 140,000 new homes over the next ten years, increasing the housing supply by between 8 and 13%.

The NAO found that the financial risk to some councils is “substantial”, due to the redistributive nature of the scheme – it is funded mainly by redistributing central government core funding, so some face losing large amounts of their funding.

The new report also warns that the Government’s estimate for the number of new homes was produced using very limited evidence and contained an arithmetic error. According to the NAO, the correct calculation of the increase in the housing supply would have been 6% to 11%, or 108,000 homes – 32,000 fewer than originally expected.

Amyas Morse, head of the National Audit Office, said: “Some local authorities could face significant cuts in their funding as a result of the New Homes Bonus scheme. While it is too early for the scheme to have had a discernible impact on the number of new homes, the signs are not encouraging.

“The Department must now urgently carry out its proposed review of the scheme to ensure that it successfully encourages the construction of much-needed new homes.”

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