The new homes bonus baseline is a punishment for district councils building new homes and should be scrapped, according to the District Council Network.
In its written response to the 2019-20 local government finance settlement technical consultation, the DCN described the baseline threshold for housing growth as a “perverse incentive” which penalises the councils which are meeting housing targets.
The amount of new homes bonus grant allocated to each local authority is currently calculated by multiplying the change in housing numbers from the previous year by the average Band D council tax in England for the previous year.
This calculation was amended, however, in December 2016 by former housing and communities secretary Sajid Javid, who introduced a national baseline threshold for housing growth of 0.4% - meaning that housing growth up to this level is “no longer rewarded”.
Mr Javid said the reform would “help to ensure that the money is used to reward additional housing rather than just normal growth.”
LGC previously reported how the latest local government finance settlement technical consultation said “the government expects to increase the baseline in 2019-20” due to an expected “continued upward trend for house building”. This increase is due to be outlined when the provisional finance settlement is published later in the year.
However, the DCN has described the threshold as counter-productive as it removed more than £70m in funding from district councils in 2017-18. This funding decrease is also likely to continue if the baseline is further extended as currently planned.
Sharon Taylor (Lab), DCN lead member for sustainable finance, said: “New homes bonus has been a powerful driver for housing growth, but increasing the baseline would be a perverse incentive because it would penalise the very councils which have succeeded in meeting government’s housing targets.
“We are against the proposal to increase the baseline, which instead should be scrapped.”