Islington Town Hall. Photograph: Islington Council.

Islington Council is to receive a government grant of over £5 million as a reward for the number of new homes built in the borough over the past four years.

The New Homes Bonus was introduced in 2011 as an incentive for councils to encourage housing growth in their area.

Under the scheme, town halls can spend the funds any way they choose, for example on frontline services or to help in keeping council tax low.

However, the money comes in straitened times for Islington, with the report on the Bonus making clear the financial challenges faced by the local authority.

The report states: “Central government has cut its core funding to Islington Council by 70 per cent since 2010, on a like-for-like basis.

“The combination of government funding cuts and rising demand for services means the council needs to close a revenue budget gap of around £50m over the next three years.

“The council has already made savings of £225m since 2010.

“Despite the significant financial challenges faced by both Islington Council and local government as a whole, the council remains determined to make Islington fairer for all – making sure that every penny spent goes on things that will make the biggest difference to the lives of local people, particularly those who rely on the Council the most.”

The Town Hall has committed to building 1,900 “genuinely affordable” homes between 2018 and 2022, including 550 new council homes.