Ministers to reward councils for backing new houses

The parties are divided over the best way to fund new homes and how they should be approved

Ministers have released details of a plan to encourage councils in England to build more new homes in their areas.

Local authorities agreeing housing schemes will receive a cash award to be spent according to community wishes.

Housing minister Grant Shapps says the £946m plan will allow communities to "reap the benefits" of developments.

The announcement comes two days after ministers lost a court battle over a decision to scrap the last government's regional housing targets in England.

Efforts to remove them were ruled unlawful by the High Court - a decision that Labour, which has accused ministers of "ripping up plans" for new homes, said was a slap in the face for the government.

Proposals for a New Homes Bonus - a plan devised by the Conservatives in opposition and given the go-ahead by the coalition in August - were published for consultation on Friday.

The government is proposing to match the council tax raised on all new homes built for six years starting from next April with a surplus for every affordable home built over the period.

'Improving lives'

Councils will get the money to spend on either boosting local facilities and services or cutting council tax bills following consultation with local residents.

Mr Shapps will argue the £946m plan - which mostly comes from money previously given to councils as part of regional planning grants - will provide a "powerful" incentive for councils to back new developments.

"For too long communities have fought against development because they can't see how it does anything to improve their lives," he said.

"The New Homes Bonus will ensure those communities that go for growth reap the benefits of development, not just the costs."

He urged councils to have "mature debate" with local residents about the benefits of development.

"Local communities will now have a reason to say 'yes' to new homes because they will benefit from better local services or perhaps the redevelopment of their town centre in return for backing new housing."

Housebuilders are broadly welcoming the initiative, the House Builders Association saying it was a "welcome first step" and would "reinforce the message" new developments were good for communities.

The Home Builders Federation said it would support a "simple, easy to understand system" based on financial incentives as one way of addressing what it said was "an acute housing crisis".

Ministers say the number of new homes being built is at its lowest peacetime level for 85 years and it intends to overhaul the planning system to make it easier to get schemes off the ground and to give councils and communities the final say over where developments are sited.

But critics say government spending cuts are likely to exacerbate existing shortages while social housing reforms will do little to help the five million people currently on waiting lists for properties or enable the coalition to meet its target of building 155,000 new affordable homes by 2015.

Budget cuts

Labour have accused ministers of halving the housing budget over the next four years and said the scrapping of central housing targets in July could directly result in the loss of 160,000 new homes.

Wednesday's court ruling, which found ministers were wrong to try to revoke regional planning strategies through discretionary powers, means some developments rejected since July could proceed.

But ministers say they will publish legislation next month that will ultimately "sweep away" what they maintain are unnecessary "top-down" targets and red tape.

Housebuilders have warned that scrapping the targets without a replacement strategy would leave a vacuum and create confusion across the construction industry at an already difficult time.

Government figures published last year suggested more than 250,000 new homes would be needed every year up to 2031 to keep pace with the projected rise in the population.

Since 1990, the number of new houses finished has exceeded 150,000 on only eight occasions. About 113,000 were built last year, the lowest level in 20 years.