The New Homes Bonus scheme, set up in 2011, aims to boost new home building by paying councils per home completed in their area. These homes can be brand new, converted older properties or empty homes brought back to use.
The Government estimates that the scheme could help create 140,000 new homes over 10 years, and would hence play a small part in meeting the ideal target of building 232,000 new homes per year until 2033.
But the NAO says the 140,000 figure is based on flawed calculations. It has issued a report prompting an urgent review of the scheme, which says:
“The new homes estimate was produced using very limited evidence. The estimate also contained an arithmetical error which significantly increased estimated construction rates.
“The department estimated that the scheme would deliver around 140,000 additional new homes over its first 10 years, increasing the supply of housing by between 8% and 13%.”
The NAO says the right calculation should have been 6% to 11%, or 108,000 homes – 32,000 fewer than originally expected. It also criticised the concept of the scheme, saying:
“Some local authorities, particularly in areas where developers are less likely to want to build new homes, face losing large amounts of their funding from central Government.
“These authorities face growing financial risks, including to future service delivery.”
Housing minister Mark Prisk told the BBC:
“This report is unduly negative and unfair. Housing supply is up and planning approvals are up. We are getting Britain building.
“The reality is that the New Homes Bonus has already rewarded councils for the delivery of 450,000 homes and we are confident that it has the potential to increase supply by at least 100,000 homes over 10 years.
Shadow housing minister Jack Dromey said:
“It is extraordinarily irresponsible that ministers haven’t bothered to assess whether the £1.3bn they are spending is a good use of taxpayers’ money.
“The New Homes Bonus symbolises the Government’s failing housing policies. They are failing to increase housebuilding and the government has grossly overestimated its impact, promising much and delivering little.”