The need to build at least 300,000 new homes a year in England has become an established part of the political furniture, but that requirement could actually be much higher. A report commissioned by the National Housing Federation and Crisis from Heriot-Watt University suggested that 340,000 should be built; the Centre for Cities puts the figure at 440,000; and analysis by the Financial Times suggests that the figure could be as high as 529,000 if current net migration levels hold.
Analysis by Lichfields for HBF and LPDF (see below) puts the current shortfall of homes at 2.1 million, rising to close to 3 million by 2030, and suggests that 2.4 million extra homes would be needed to match the per capita average of comparable northern European countries.
The most recent Housing Delivery Test results reveal that the combined annual monitoring benchmarks for Local Planning Authorities (LPAs) are well below 300,000 (in 2022 they totalled 259,000) and the cumulative requirements in local plans currently add up to just 230,000.
Coincidently, but perhaps not surprisingly then, according to according to Energy Performance Certificate data 229,700 new homes were built in the twelve months to Q2 2024, a 5% decrease on the previous year (see below).
As the Competition and Markets Authority (CMA) identified, an insufficient number of planning permissions have been granted to meet a 300,000 home target.
The CMA cited Lichfields research which stated that to deliver 300,000 homes annually would require a stock of approximately 1.4m homes with permission at any one time and the approval of approximately 350,000 to 375,000 new dwellings every year.
HBF’s most recent Housing Pipeline report found that the number of homes granted planning permission in the year ending Q1 2024 was just 236,644, which was the lowest 12-month total for almost a decade.
The vast majority of people, be they planners, property professionals or the general public, would likely support the principle of a plan-led system, which would mean that the majority of these permissions would be proactively planned for through local plans rather than reactively planned for through the development management process. The ‘presumption in favour of sustainable development’ is an effective safety value to ensure that land comes forward when a LPA does not get a local plan in place, but local plans are the optimal way of planning for homes alongside, for example, jobs, nature recovery, infrastructure and so on at the same time.
How then can the aggregate total of homes being planned for in local plans be increased from 230,000 to closer to 400,000?
Following the revocation of Regional Strategies in 2010 and the introduction of the National Planning Policy Framework (NPPF) in 2012, the responsibility for determining local housing needs and requirements fell upon LPAs. Guidance on how to do so subsequently emerged in 2014, but there was little consistency of approach; no link with any national target for increasing the number of homes; and significant time and resources were spent, before and during local plan examinations, debating the merits of different approaches.
This became such a significant factor in delays in local plan preparation that the ‘Fixing Our Broken Housing Market’ White Paper of 2017 stated that:
But at the moment, some local authorities can duck potentially difficult decisions, because they are free to come up with their own methodology for calculating ‘objectively assessed need’. So, we are going to consult on a new standard methodology for calculating ‘objectively assessed need’, and encourage councils to plan on this basis.
The introduction of the “standard method” for calculating local housing need in 2018 provided a clear starting point for consideration of need, or the target that should be planned for (as distinct from the requirement that is ultimately planned for). Over time, however, the current standard method has become unfit for purpose.
Fundamentally, by projecting forward past trends, household projections have resulted in artificially low projections, particularly where overcrowding and concealed households have suppressed household formation (which generally happens in the least affordable parts of the country).
Household projections have also proved volatile and subject to change every few years and so to guard against regular shifts and to provide a platform for LPAs to get local plans in place the previous government opted to lock in 2014-based projections, rather than updating the formula to incorporate more recent updates, topping up the total with arbitrary 35% ‘urban uplift’ in London and the nineteen other largest towns and cities.
Of the 305,000 homes in the current standard method, just under a third is in London, which has a plan with a target of only slightly more than half and no mechanism for redistributing what it cannot provide outside of the M25. Further, there is little evidence that the 19 other cities that subject to the ‘urban uplift’ are realistically capable of delivering these elevated need figures.
The new Government likely toyed with two options for actually planning for 300,000 new homes.
There was the option of reverting back to objective assessments of local need, perhaps in so doing addressing the issues for LPAs when undertaking Strategic Housing Market Assessments (SHMAs) that were identified by the Local Plans Expert Group in 2016. This study identified that behind the time and resources was the absence of both pre-set housing market area boundaries and definitive guidance on how prepare a SHMA.
Whilst perhaps an ambition for the longer term (in parallel perhaps with the re-emerging strategic planning tier and alongside the type of national Housing Delivery Unit recommended by the Radix Big Tent Housing Commission), this more disruptive option has been eschewed in favour of putting the standard method on a more robust, empirical footing.
The recently proposed changes to the NPPF include a new standard method that:
- Uses a baseline set at a percentage of existing housing stock levels, designed to provide a stable baseline that drives a level of delivery proportionate to the existing size of settlements, rebalancing the national distribution to better reflect the growth ambitions across the Midlands and North;
- Tops up this baseline by focusing on those areas that are facing the greatest affordability pressures, using a stronger affordability multiplier to increase this baseline in proportion to price pressures; and
- Removes arbitrary caps and additions so that the approach is driven by an objective assessment of need.
This proposed stock-based proposition aligns with the CMA’s recommendations for housing targets to be based on an easy-to-understand methodology and reliable and up-to-date information.
As Lichfields has identified, the advantages of this approach are considered to be that it:
- Remains relatively simple, using national and freely-available statistics that are produced consistently for all local areas, are robust and updated regularly;
- Uses inputs that are stable over the medium to long term;
- Avoids the circularity and volatility of household projections whereby low rates of housebuilding lead to low levels of household growth, which is then perpetuated by trend-based projection; and
- Ensures the SM genuinely 'boosts' housing supply, across all parts of the country, as per the original intention of the policy.
Within the headline national increase of 305,000 to 370,000, the proposed standard method would see boosts in every region. The need would be in the order of 20–70% higher than recent rates of housing delivery across all regions except London.
Taken together with the other proposed changes to the NPPF, notably the short-term boosts to supply accruing from the reversal of the December 2023 changes and the potential for ‘Grey Belt’ land to come forward ahead of local plan reviews, as well as the long-term benefits of the afore-mentioned return to greater-than-local planning, it is possible to see how the revised standard method will loosen planning constraints in areas that have capped local plan targets hitherto, and expedite further supply in less constrained areas where current targets are largely already met.
Putting aside for one moment the other obstacles to building 300,000 homes, fundamentally a Government cannot expect to do so unless it is planning to do so. The proposed standard method is a sign that the new Government might actually be prepared to.
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