As the Levelling-Up Bill trundles its way through debate, amendment, and further debate in the Lords, our industry has been grappling with the myriad of policy changes proposed within its current language. Outside of the numerous, substantial, amendments already proposed (the abolition of local housebuilding targets, the mandating of a ‘Healthy Homes’ standard, reforms to nutrient neutrality regulations, and the linking of LNRS to Local Plans – to name a few), SW1 is happily chattering about further changes that may be added late into the Bill’s progress.

One such potential amendment, as recently highlighted by The New Statesmen and by the Economist in 2021, aims to address embedded opposition to new housebuilding– often within communities with limited levels of new homes, and outdated local plans & SPDs – by directly financially compensating households close to residential developments.

The proposals

Recognizing the disruption construction may bring, and any potential reduction in neighbouring house prices, some proponents have argued to either:

  • Directly pay nearby households a ‘New Homes Bonus’ – as coined by the former Environment Secretary Raniel Jayawadena – once a project has been completed. This could either provided as a proportion of each residential sale, or as a defined contribution made to each household (similar to a S106 payment) upon the receiving of planning permission.
  • Reduce nearby Council Tax levies to offset the costs associated with development; including reducing business rates to nearby retailers.

There are good policy justifications for such proposals. With public opinion broadly opposed to the reforms needed to deliver many residential schemes (in particular, reducing the size or protection of the Southeast’s Green Belt) – it should be incumbent on the Government to quickly change the consensus towards development.

If, as Ben Ansell has argued, there is “no majority supporting building new houses locally in the UK”, the introduction of a financial incentive to support housebuilding should, surely, be welcomed? Unfortunately, these proposals are not new, and the fact that they are yet to be implemented, despite multiple iterations, is indicative of their inherent flaws.

The British history of financial incentives

Starting with the Open Source Planning Green Paper in 2009, many Conservatives have long supported:

“creating a real and substantial financial incentive to reward communities that accept house building… (meaning) that those directly affected by development are those that benefit.”

For local authorities, this pledge led to the creation of the New Homes Bonus – a direct financial payment made for each new house constructed within their jurisdiction. Nonetheless, the idea of directly compensating communities rather than Councils lived on, with Nick Boles, the then Planning Minister, trialling a ‘Boles Bung’ policy in 2013; allowing communities which successfully drew up neighbourhood plans to receive 25% of CIL monies, with no upper limit on the funds received.

Building from this, Deputy PM Clegg suggested offering council tax discounts to local communities which would accept ‘Garden Cities’ within their boundaries – arguing that his proposals would “allay those concerns of people who feel that their property… might be affected.” Finally, via the 2014 Budget, Chancellor Osbourne announced a review of a ‘Development Benefit’ system, aimed at “passing a share of the benefits of development directly to individual households.”

None of these proposals, despite their backing from key Government ministers enjoying a strong Parliamentary majority, ever came to fruition, and the idea of paying households directly remains theoretical (despite a revaluation of the idea by Prime Minister May, regarding onshore fracking).

Do financial incentives work?

Research conducted into these schemes indicates that they would be either be ineffective or counterproductive in enabling new supply. The Government’s own research found that 84% of local people would not be influenced by a direct financial payment and that it would not impact their “likelihood to engage in some form of direct or indirect opposition” to housebuilding. Indeed, this research found, financial payments were “associated with ‘bribes’ by 46% of respondents”.

These findings are broadly replicated, with Frey & Oberholzer-Gee finding that offering payment to Swiss communities to accept a nuclear infrastructure project actually reduced support for an application. In one neighbourhood, support for an application, before payment, was 50.8%, which fell to 24.6% when payment was offered – with many highlighting the ethical and principled concerns reported by the UK Government’s research.

A viable road forward

Through our work communicating, and liaising, with local communities and neighbourhoods on complex, and often controversial, planning applications, it is also clear that these policies would not work. Portraying opposition to housebuilding as offsetable by financial payment is at best highly cynical, and could be viewed as insulting, and misunderstands the deep and understandable passion local communities have in protecting their local townscapes.

Building support from these communities will not come from direct payments. At Redwood Consulting our approach to supporting our clients planning applications is to build viable relationships with all local stakeholders. Our experience is that if people feel you have taken the time, and trouble, to understand their perspective, they are more likely to engage constructively, and consistently, with our development proposals.

Stepping back, though, we feel there is scope for the industry to do more in demonstrating the benefits of development. As Redwood’s Gabriel Abulafia argues in his recent blog, developers, architects, and others need to shout more about their good work. Very few politicians make the case for new homes – and our industry needs to help them do so.