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New Homes Bonus reforms ‘disproportionately’ punish district councils

Planned government reforms to the New Homes Bonus (NHB) will have a “disproportionate” impact on district councils, limiting both the incentive for growth and the funding to support it in smaller communities, the District Councils’ Network (DCN) has said.

In its consultation response to the provisional local government finance settlement, the DCN has complained that district councils have seen 5.2% cuts to their core spending power compared to an average reduction of 1.1% across the entirety of local government.

This is despite district councils being responsible for siting over half of all new housebuilding projects nationwide, as the DCN called the reduction a “swingeing cutback”.

Cllr Neil Clarke, chairman of the DCN, said: “From the DCN perspective, NHB changes strip out £75m from district council revenues and risk destroying the link between local economic growth and the funding of local public services.

“The NHB is a reward for growth that allows district councils to provide the additional facilities and services required to meet the needs of existing and new residents alike in delivering more housing and is vital in ensuring support for future housing growth.”

The DCN has particularly criticised the introduction of a new 0.4% baseline for housing growth, under which councils will not receive any NHB.

The network has called the change “unfair and counterproductive” as many district councils will now receive no NHB revenues next year, and it was not included in the original consultation.

Councils currently face the challenge of building 200,000 new homes a year as they attempt to meet housing industry targets and assuage the social care crisis with new homes for older people.

However, the DCN has said that the changes to the NHB, alongside 1% reductions to rent and the government’s refusal to consider lifting the housing borrowing cap does not give councils the financial incentive to build, calling for a “sustainable and long-term funding solution”.

“These NHB reforms will not only stymie vital attempts to encourage economic and housing growth in our areas but will also hamstring the starring role of districts as drivers of local preventative services,” Cllr Clarke added, calling the reforms “sticking plaster solutions which only recycling existing local government funding”.

The DCN has proposed in its response to the consultation that the baseline housing growth level should be fixed at 0.25% for two years rather than 0.4%.

It also looks to encourage the introduction of a 2% council tax precept for district councils to reflect the role they play in preventing and reducing social care demand across the country.

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