The New Homes Bonus

1. The New Homes Bonus

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 2

3. 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

4. �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

5. 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?

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 6

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) 7

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 10

11. How the bonus builds - example 11 Note, each year�s funding repeated for 6 years Total amount received goes up from Year 1 to Year 6 Then levels off around Year 6, reducing in Year 7Note, each year�s funding repeated for 6 years Total amount received goes up from Year 1 to Year 6 Then levels off around Year 6, reducing in Year 7

12. 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)

13. 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

14. 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

15. 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?

16. 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 If LTEs go down one year you will get the bonus even if the LTEs go up following year. But your increased LTEs will produce negative NHB so effectively netted off If LTEs go down one year you will get the bonus even if the LTEs go up following year. But your increased LTEs will produce negative NHB so effectively netted off

17. 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

18. 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

19. 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

20. 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

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. 21

22. 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

23. 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

24. 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

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? 25

26. 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?

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 27

28. EHB Winners and losers � by decile 28 Max = Bradford Min = Cheshire EastMax = Bradford Min = Cheshire East

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. 29 This looks at how much money councils would have got if the money had been shared out pro rata to dwelling stock and compares it with how much they actually got.This looks at how much money councils would have got if the money had been shared out pro rata to dwelling stock and compares it with how much they actually got.

30. Winners and losers � by decile 30

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 31