As part of the government’s new localism agenda, the New Homes Bonus scheme aims to reward local authorities that enlarge their housing stocks. While such a programme should help encourage the building of much-needed housing in the UK, Henry Overman finds that the government’s claims for an increased housing stock in the last year may be over-inflated.
Two weeks ago, DCLG announced the first payments under the New Homes Bonus: “Under the first cash payments for the scheme, 326 local authorities will receive a share of £200m for increasing the effective housing stock by almost 150,000 in 2010-11”. In contrast, “in 2009 there were just 118,000 completions, the lowest level of house building in peacetime since 1924”.
On first impressions this seems like good news. But, sadly, this is yet another of those occasions when first impressions are misleading. It took me a while to delve behind the numbers, but here is my understanding. An increase of 150,000 in the effective housing stocks may sound bigger than 118,000 completions but that first impression is misleading because those two numbers are calculated differently.
In 2010/11 the 150,000 increase in effective housing stock comprised 134,000 net additions and 16,000 empty homes brought back in to use. The government provides net additions data from 2004 onwards. They are calculated slightly differently from the figures used for the New Homes Bonus but the 129,000 figure for net addition in 2010/11 is close enough to the 134,000 figure reported by DCLG above to suggest the data are broadly comparable. Here is what those data show:
04/05: 186,930
05/06: 198,780
06/07: 207,370
08/09: 166,580
09/10: 128,690
So the 2010/11 figures represent the worst net addition figures for the last five years. I think the government could argue that given the recession things may have been even worse without the New Homes Bonus (although the 08/09 numbers already capture the impact of the recession) and I think it would be reasonable to see what the numbers look like next year. But certainly the picture is much more worrying than misleadingly comparing completions to net additions.
This post first appeared on the LSE’s Spatial Economics Research Centre blog on 15 April.
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