Exclusive: Coalition housing plans destined to fail, Ministers told

Tory-led councils, major housebuilders, architects and economists have all warned the "New Homes Bonus" – which offers extra money to councils and replaces Labour's controversial regional targets – is unlikely to lead to the surge in housebuilding promised by the Government.

Their warnings are a blow to Housing Minister Grant Shapps who claims the scheme, due to start next April, will be a "massive incentive" and see more homes built under the coalition than under Labour.

The bonus would see the Government give councils match funding of the council tax receipts for every new home for six years – worth 1,406 a year for the average Band D home in the region – and Mr Shapps hopes that it will encourage communities to back developments because the area will be able to spend the bonus on infrastructure and service improvements.

But a series of submissions to the Commons Communities and Local Government Select Committee reveals deep scepticism over whether it will work.

East Riding Council's forward planning and housing strategy manager, John Craig, said the principle of the New Homes Bonus was "attractive" but expressed "concerns about how acceptable this will be to communities in practice".

He said some of the incentive may have to be paid up front – rather than when the homes are finished – to win over communities because services and infrastructure are needed in advance.

"Even with the offer of funding, and in the face of acute affordable housing shortages, the council is unsure how successful it will be in persuading communities of the benefit of new housing," he said.

Fellow Tory-led Hampshire County Council also warned the level of funding would be "insufficient" to provide the necessary infrastructure and services, while Prof Tim Leunig from the London School of Economics said: "No academic or independent expert I know believes that the incentives are large enough to maintain let alone raise house building rates."

A similar warning from the Royal Institute of British Architects is also echoed by Barratt Developments – the country's biggest housebuilder which says Ministers should also allow councils to keep stamp duty and an extra 5,000 per home levy to make "sufficient incentive".

The Government believes the New Homes Bonus will cost around 200m but some councils are set to lose out because the money will be sliced off general grants to local authorities. Mr Shapps has said the scheme will "facilitate the building of many more homes in every area of the country", with the Government paying an extra 25 per cent incentive for affordable homes, as housebuilding recovers slowly from the recession.

Latest figures show work started on 2,910 homes in Yorkshire and the Humber in the second quarter of the year - the most for two years. Some 2,300 homes were also completed, still barely half the peak number of properties finished in 2007.

Ministers have made great play of tearing up the system of targets which demanded the building of 240,000 homes in Yorkshire over the next 11 years.

A Department for Communities and Local Government spokesperson said: "This Government is committed to housing growth, with incentives to build new homes being the cornerstone of the our plans. The New Homes Bonus Scheme is part of the wider family of incentives and funding programmes to replace targets that haven't worked, with localism that will."