Banks Blog: The new standard method for calculating housing need, by Ellen Morton

July 9, 2019 | Blog News

Pictured above: Ellen Morton, graduate planner, Banks Property

Did you know, that the population of England currently stands at over 65 million, and the Office for National Statistics (ONS) projects this to rise by around three and a half million to nearly 70 million by 2031? [Footnote 1]

The Ministry of Housing, Communities & Local Government, which is the government department responsible for developing and implementing the policy framework to deliver new homes into the UK housing market, has determined that that in order to properly keep up with projected population growth and help address the rising levels of homelessness in our society, at least 300,000 new homes, per year, need to be built. [Footnote 2]

So what has this got to do with the development industry?

Banks Property has over 30 years’ experience developing land in the north of England and Scotland, to provide high quality, much-needed homes for people in the places that they want to live. As part of our development with care approach, we prioritise working with communities, from a very early stage, to ensure our projects deliver significant social, economic and environmental benefits in the areas that we work.

Our in-house property team has secured planning permission for around 10,000 homes and continues to contribute to meeting the increasing housing need in the UK.

Planning applications for housing developments are assessed against local planning policy, and housing need is essential in forming this policy, as land is released for housing in line with this need.

However, until recently, exactly how housing need was determined varied from authority to authority. There was no consistency in approach, and it was often argued by critics that the various methods adopted by different local authorities used were rather opaque and at times their methodology was not very clear.

In order to address these issues, and to ensure that the 300,000 houses per year target is achieved, in February 2019, MHCLG adopted and rolled out a new ‘standard method’ for calculating the housing need for every local authority in the UK.

This standard method attempts to calculate housing need using the projected household growth of an area and adjusting them based on the affordability ratio of the area. This affordability ratio compares average house prices to earnings.

One of the objectives of this new method is that more houses are being built in areas where the affordability ratio is poor (i.e. where houses cost significantly more than average earnings), and this will help to drive the cost of housing down. [Footnote 3]

Another objective of this new standard method is designed to simplify and streamline the various methods previously used by local authorities into a clearer, consistent, national approach used by all authorities.

It is hoped that this new method will help inject some impartial data into debates about housing needs in local areas (particularly where development in contentious) and speed up the local plan making process and indeed the planning process for new homes.

So far, so good. But the calculation standard method is not without criticism…

Does this new method work? Is projected household growth and affordability a valid way to forecast the number of new homes needed in a local area?

Arguably just looking at two factors, i.e. household growth and affordability is perhaps an oversimplification. There are other factors that contribute to the homes needed in any given local area. For example, the predicted economic growth in an area or the number of people who want to buy a home but can’t are currently not taken into account by the standard method.

Also when this new formula has been applied to real areas, it generally results in an increased housing need but it actually results in some areas having a negative housing target: Nearly half of local authorities see a fall in their housing assessment – a move which can hardly be said to be encouraging growth. [Footnote 4] Authorities which have lots of land, cheap house prices and growing economy will potentially be able to settle for a target much lower than they could deliver, potentially stemming development.

A number of areas, especially the South East / the ‘London commuter belt’ and London itself, which struggle to find land for new homes, have very high targets that they’re unlikely to meet, which could result in sanctions from central government on the London Boroughs concerned. Areas constrained by green belt, and inner-city areas may just simply not have enough free land to build the new homes they will need according to the standard method. [Footnote 5]

When every local authority has different aspirations, different land availability and different physical constraints, does adopting one simplified method, fit all?

The Government has already stated that it will be consulting on a new method for objectively assessing housing need before 2020.

What this will entail is being speculated upon in the UK housing and development industry at the moment.

Although I can appreciate the reasons for the Government wishing to simplify housing need assessments to ensure delivery of new housing, in the next ‘standard method’, I would like to see the steps taken to ensure more flexibility between local authorities, to make sure that new housing is delivered in the areas which are socially, economically and environmentally sustainable.

Watch this space…

By Ellen Morton is a graduate planner at Banks Property and one of The Banks Group’s bloggers

Footnotes:

1. Office for National Statistics, 2017, National Population Projections: 2016-based statistical bulletin.

2. Ministry of Housing, Communities & Local Government, 2018, Government announces new housing measures. Accessed online at: https://www.gov.uk/government/news/government-announces-new-housing-measures

3. Ministry of Housing, Communities & Local Government, 2019, ‘Housing and economic needs assessment’, Planning Practice Guidance. Accessed online at: https://www.gov.uk/guidance/housing-and-economic-development-needs-assessments#housing-need

4. Ministry of Housing, Communities & Local Government, 2017, Housing need consultation data table. Accessed online at: https://www.gov.uk/government/consultations/planning-for-the-right-homes-in-the-right-places-consultation-proposals

5. National Audit Office, 2019, Planning for new homes [report for the House of Commons]. Accessed online at: https://www.nao.org.uk/report/planning-for-new-homes/

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