Housing minister gets Treasury approval to write to councils detailing house-building incentive package

Housing minister Grant Shapps has managed to get Treasury sign-off to write to councils confirming plans to give them financial incentives for the construction of new homes.

The letter is thought to detail the cash that councils will be able to count on if they allow development in their constituencies, in an attempt to head off a deepening planning hiatus. The incentives, promised in the Tory manifesto, are to be known as the “New Homes Bonus.”

Shapps had originally planned to put the letter out at the end of last month, but has been in negotiation with the Treasury over the exact wording of the letter, as the incentives clearly have spending implications. The full text is likely to be released later today, with the department confirming an announcement was due shortly.

Housebuilders’ representatives have been calling on Shapps to provide some reassurance over the implementation of the incentive package after the communities secretary Eric Pickles cancelled regional plans within weeks of the formation of the coalition government. Regional plans, known as RSSs, contained housing targets for councils, and their cancellation has led to the ditching of plans for at least 85,000 homes so far, according to research by planning consultancy Tetlow King.

Shapps has previously said in public that the incentives will see the government matching council tax receipts for six years after construction of new homes, and match-funding 150% of council tax for the same period for every affordable home. The money is likely to come from within the overall council funding settlement, meaning councils that build fewer homes will lose out.

However, despite these public statements there has not so far been any formal communication of these policies to councils, meaning most have been unwilling to rely on them in forming local plans. Housebuilders and councils will be scanning the letter to see how much detail Shapps has been able to go into about how the plan will work.

Building reported last week that Shapps’ letter was being blocked by the Treasury, but he told the magazine on Friday a text has now been agreed with the department.

The communities department is planning to consult on the fine detail of the package before Christmas, with the aim of introducing the incentives after April next year.