The New Homes Bonus

1. The New Homes Bonus Presented by David Gibbens, Policy Lead, Empty Homes Network London Empty Property Officer Forum 2nd March 2011

2. Learning Objectives • To understand how the New Homes Bonus is calculated • To understand how the amount of bonus builds up over time • To understand how the New Homes Bonus relates to Formula Grant • To understand how the New Homes Bonus proposals relate to empty homes work

3. What it is • 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

4. Importance of empty homes • “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)

5. How are “net addtions” counted? • 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

6. 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

7. 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)

8. Example 1 – Year 1

9. Example 2 – Year 2

10. 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

11. How the bonus builds - example

12. How calculated (per home) • 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

13. Winners and Losers • 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

14. Funding Profile • 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

15. Where will the money go? When? • 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)

16. Implications for empty homes • 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?)

17. Other points • 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.!!

18. Implications for exemptions • 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?

19. Implication for EDMOs • EDMOs the only enforcement tool directly targeted at LTEs • Councils may find it easier to justify work and expense associated with EDMOs.

20. Data Issues • 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?

21. 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.

22. Operational implications • 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

23. Organisational implications • 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)

24. Strategic Aspects • 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

25. 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?

26. Perverse Incentives? • 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?

27. 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

28. EHB Winners and losers – by decile

29. 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.

30. Winners and losers – by decile

31. Any Questions? Or contact me after the event: David Gibbens Empty Homes Network, PO Box 703, Exeter, EX1 9PX david.gibbens@ehnetwork.org.uk www.ehnetwork.org.uk 0844 736 5 736