The New Homes BonusPresented by

David Gibbens, Policy Lead, Empty Homes Network

London Empty Property Officer Forum2nd March 2011

The New Homes Bonus

Learning Objectives

1. To understand how the New Homes Bonus is calculated

2. To understand how the amount of bonus builds up over time

3. To understand how the New Homes Bonus relates to Formula Grant

4. To understand how the New Homes Bonus proposals relate to empty homes work

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The New Homes Bonus

• Intended to encourage housing growth• Net additions to housing stock “rewarded” by

grant to local councils• No restrictions on how money can be spent• “Net additions” take account of numbers of

long-term empty homes

What it is

The New Homes Bonus

• “Empty homes are a blight on local communities and a waste which we cannot afford. We need to harness this potential to meet pressing housing need.” (final scheme design para 17)

• “Empty homes are a blight on communities and are a cause of anti-social behaviour” (final scheme design, Ministerial Foreword)

Importance of empty homes

The New Homes Bonus

• Using Council Tax Base form to arrive at– Total number of dwellings less number of long-

term empties– (Less number “recently demolished” or “out-of-

area”)

• Deduct last year figure from this year figure• = net additions over the year

How are “net addtions” counted?

The New Homes Bonus

What does the LTE figure ignore?

• None of the following are counted as LTEs– Second homes– Exempt homes of all categories– Homes removed from valuation lists

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The New Homes Bonus

What LTEs are counted

• Lines 12, 14 and 15 on the CTB form– Unoccupied– Not exempt, second homes (see last slide!)

• Lines refer to different discount options– Line 12 = receiving 50% discount– Line 14 = receiving 0% discount– Line 15 = receiving other % discount

• Note that some councils have more than one discount rate (eg Watford)

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The New Homes Bonus

CTB Form Year 1 Year 2 NetDwellings 100,000 101,000 +1,000Recent demolitions -10 -5 +5Long-term empties -2,000 -1,800 +200Net dwellings 97,990 99,195 +1205

RateBONUS £1500 £1,087,500

Example 1 – Year 1

The New Homes Bonus

CTB Form Year 2 Year 3 NetDwellings 101,000 101,500 +500Recent demolitions -5 -5 +0Long-term empties -1,800 -1,850 -50Net dwellings 99,195 99,645 +450

RateBONUS £1500 £675,00

Example 2 – Year 2

The New Homes Bonus

Year-on-year

• Once calculated, you get the same amount for 6 years

• This first year it will amount to about £198M• The total amount of bonus will build up over

the first 6 years of the scheme• Then it levels off – new years are added but

old years drop off

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The New Homes Bonus

How the bonus builds - exampleY1 tot Y2 tot Y3 tot Y4 tot Y5 tot Y6 tot Y7 tot Total

Y1 NHB 1087k 1087k 1087k 1087k 1087k 1087k 6.525M

Y2 NHB 675k 675k 675k 675k 675k 675k 4.050M

Y3 NHB 900k 900k 900k 900k 900k 5.400M

Y4 NHB 900k 900k 900k 900k -

Y5 NHB 900k 900k 900k -

Y6 NHB 900k 900k -

Y7 NHB 900k -

Total 1.087M 1.762M 2.662M 3.562M 4.452M 5.362M 5.175M

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The New Homes Bonus

• Amount per ”new” home=6 years council tax, at national average for band e.g.£1, 439 p.a. over 6 years for current Band D£8,634 total at current council tax rates

• Expensive homes generate bigger bonus• £350 flat rate extra p.a. per new affordable

home = £2,100 over 6 years

How calculated (per home)

The New Homes Bonus

• Bonus or penalty?

The NHB is “set to be funded by taking money out of the formula grant…the policy therefore – in the long run - is revenue neutral”

• Those getting reward do so at expense of those that don’t

Winners and Losers

The New Homes Bonus

• DCLG set aside – £196M for 2011-12– Then £250M p.a. for 2012-14

• Any extra comes from Formula Grant• That will start in 2012-13: total NHB c. £400M,

new money £250M.• After 2014 all will come from Formula Grant

Funding Profile

The New Homes Bonus

• Proposed split in 2-tier areas:– 80% districts– 20% upper tier (counties)

• If measure is approved, it is ALREADY LIVE– First year’s bonus paid April 2011– Based on (2010CTB) minus (2009CTB)

Where will the money go? When?

The New Homes Bonus

• 1 LTE extra costs £1.4k of bonus x 6 years (depending on banding) – say £8.4K

• 1 LTE less generates £1.4k of bonus x 6 • Bonus only sustained if reduction sustained[1]• Councils no longer able to ignore empty

homes – will be mainstreamed (won’t it?)

Implications for empty homes

The New Homes Bonus

• Demolitions count same as LTEs for 6 years• Punishes authorities with surplus dwellings,

but incentivizes re-use• Encourages LA’s to make better short-term use

of redundant stock• Makes councils responsible for private sector

owners• Your LTE owner now costs your council and

other tax-payers £1k+ p.a.!!

Other points

The New Homes Bonus

• Unfurnished empties get Exemption Class “C” for 6 months

• At 6 months + 1 day they start costing the local community £1,000+

• Is that a fair balance between the individual and the community?

Implications for exemptions

The New Homes Bonus

• EDMOs the only enforcement tool directly targeted at LTEs

• Councils may find it easier to justify work and expense associated with EDMOs.

Implication for EDMOs

The New Homes Bonus

• Council tax figures for LTE’s notoriously inaccurate

• Already too late to manipulate 2009 and 2010 CTB

• Significant costs or benefits associated with inaccurate data

• Authorities with inflated numbers of empties will do well by cleansing data

• Will it encourage action against fraud, error and delay in owners updating council tax position?

Data Issues

The New Homes Bonus

Who decides whether LTE?

• The council determines whether they think a home is LTE, second home etc

• If the owner disagrees they can appeal to the Valuation Tribunal

• Don’t accept that Council Tax dept. “can do nothing” if owner has mis-represented the status of their property.

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The New Homes Bonus

• The figures in September become critical• Expect massive push to identify occupied

homes registered as LTEs July, August• Also vital to target homes coming up to 6

months empty July, August• Makes no difference how long homes are

empty – focus on most numerous ie. those around 6 months empty BUT

• No point in dealing with those coming back into use anyway

Operational implications

The New Homes Bonus

• Where will empty homes work sit?– In council tax, housing or environmental health?

• Internal partnerships and corporate working should become easier!

• Council tax data might become easier to access!

• But the truth may be resisted (empties that are registered as occupied)

Organisational implications

The New Homes Bonus

• What will be impact on LTE discount levels? • Councils will want to resist removal by VOA

more vigorously• Potential boost to Living-over-the-Shop and

conversion initiatives• Hitching empty homes work to LOTS

initiatives may make them more sustainable • Incentives to convert homes can be valuable

eg Technical Assistance

Strategic Aspects

The New Homes Bonus

Political implications

• Tax-payers will know that their council tax level affected by numbers of LTEs

• How will tax-payers / community respond?• How will Members respond?• How can we avoid the blame game when

numbers go up• How can we highlight our successes

separately from LTE figures?

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The New Homes Bonus

• Furnished empties count as second homes, generate income for LA. Incentivise LTE owners to furnish homes?

• Exempt homes don’t count – can you move home to Exemption Category “A”?

• Make LTEs more expensive than second homes (differential discount rates)?

• Hints to owners they won’t be pursued so long as they pay council tax?

Perverse Incentives?

The New Homes Bonus

EHB Winners and Losers

• 2009-10 figures:– 116 councils with increasing LTEs– 210 with decreasing LTEs

• So 116 councils lost NHB because of their LTE figures

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The New Homes Bonus

EHB Winners and losers – by decile

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Bottom decile -£94,5092nd decile -£38,0593rd decile -£14,7124th decile £7,0365th decile £24,3876th decile £51,1727th decile £77,2388th decile £111,4609th decile £211,565Maximum amt. £1,729,783

Minimum amt -£750,793

The New Homes Bonus

Winners and losers – dwelling stock

• 2009-10 figures:– 187 less than “fair share”– 139 more than “fair share”

• Thus more losers than winners on this calculation

• NB this calculatoin doesn’t account for difference in council tax banding.

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The New Homes Bonus

Winners and losers – by decile

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Deciles"Winners and losers"Bottom decile -£409,7132nd decile -£228,3693rd decile -£151,7844th decile -£91,2425th decile -£52,3576th decile £13,7017th decile £69,2788th decile £171,8759th decile £387,770Maximum amt. £3,358,814

Minimum amt -£1,276,781

The New Homes Bonus

Any Questions?

Or contact me after the event:David Gibbens Empty Homes Network, PO Box 703, Exeter, EX1 9PXdavid.gibbens@ehnetwork.org.ukwww.ehnetwork.org.uk0844 736 5 736

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