Housing Minister Grant Shapps has called on councils to sit down with residents and decide how to spend the rewards of going for growth.

The Minister confirmed the first cash payments through the New Homes Bonus, totalling almost £200m for areas building new homes.

In a letter to council leaders, Mr Shapps said these powerful incentives have the power to transform housebuilding by encouraging local communities to support rather than resist development - but it is vital that residents now have the opportunity to choose how these building bonuses are spent.

Through the New Homes Bonus the Government will match the council tax raised from new homes for the first six years. The bonus available for an affordable home will be up to 36 per cent more than for a similar market home, equivalent to an extra £350 per house premium every year. Empty properties brought back into use will also receive the cash bonus for six years.


This means councils can receive payments of almost £9,000 on average for each band D home or almost £11,000 for an equivalent affordable home. So if an area increased the number of homes by 1,000 units this could earn a community almost £10m to spend as they see fit - which could deliver a much needed economic boost to their local area at a time when public finances are tight.

Mr Shapps said: "The system where Whitehall told communities what homes they need to build never worked. Housebuilding declined for years, eventually slumping to its lowest peacetime level since 1924. The construction industry suffered terribly, and in many areas plans for new homes created a bitter legacy of divided communities and animosity towards developers.

"This country needs more homes, so we need the nation to start building again - but this time with the backing of local communities rather than in the teeth of their opposition. That's why we're giving communities a reason to say yes to new homes through these powerful cash incentives.

"But this funding from Government is only the start of the process - it is now essential that councils engage with their local community to decide how the money is spent, so residents feel the direct benefits of growth, rather than extra pressure on local services."

Under the first cash payments for the scheme, 326 local authorities will receive a share of £2m for increasing the effective housing stock by almost 150,000 in 2010-11.

Communities themselves will decide how to spend this extra funding - whether council tax discounts for local residents, boosting frontline services like rubbish collection or providing local facilities like swimming pools and leisure centres.

(CD/GK)