Briefing - Assessing an area's housing supply shortfalls accurately

Planners and developers need to tread carefully on techniques to assess housing supply shortfalls, says Christopher Rees.

New homes: two main methods of calculating supply
New homes: two main methods of calculating supply

Q: Why do housing land supply assessments matter?

A: Councils' ability to demonstrate five years' worth of deliverable housing supply has never been more important. Different methods for calculating supply are often the subject of debate at appeal.

Q: Why do councils need to produce a five-year land supply assessment?

A: Paragraph 47 of the National Planning Policy Framework (NPPF) requires local planning authorities to identify specific deliverable sites to provide five years' worth of supply against their housing requirement, plus a margin of five per cent from later in the plan period to ensure choice and competition. If there is evidence that an authority has persistently underdelivered, this buffer rises to 20 per cent.

Failure to meet this test means that policies on housing supply cannot be considered up to date. This adds weight to the tests for decision-making in paragraph 14 of the NPPF, including its presumption in favour of sustainable development.

Q: What are the key elements of a housing land supply assessment?

A: By way of illustration, take a local plan setting a total requirement for 1,600 dwellings, or 160 per annum, over a ten-year period from 2011 to 2021. The five-year requirement from 2013 to 2018 would be 800 units, with the five per cent buffer bringing this to 840. This equates to an annual requirement of 168 dwellings.

If deliverable sites can accommodate 500 dwellings, this would equate to three years' supply. But the position becomes more complicated if there has been an undersupply in previous years of the plan period. There are two acknowledged ways of dealing with this: the Liverpool Method and the Sedgefield Method.

Q: How does the Liverpool Method work?

A: Under this method, the residual requirement - the total number of homes still left to build - is divided by the number of years remaining in the plan period. In the example above, underdelivery of 200 units from 2011 to 2013 would leave a total requirement for 1,480 dwellings averaged over the remaining eight years, or 185 per year. With the five per cent buffer, the annual requirement would be 194 dwellings between 2013 and 2018. Deliverable sites for 500 homes would therefore represent a supply of just under 2.6 years.

Q: What about the Sedgefield Method?

A: The Sedgefield Method requires the whole of any previous shortfall to be factored into the housing requirement for the five-year assessment period.

In our illustration, the 2011-13 shortfall of 200 homes would be added to the original annual requirement for 800 homes over five years. With the five per cent buffer, this would take the total requirement for 2013-18 to 1,050 - an average of 210 dwellings per annum. On this basis, deliverable sites for 500 homes would constitute a supply of only 2.4 years.

Q: Which is the correct methodology to use?

A: Since adoption of the NPPF, the Sedgefield Method has gained ground with the secretary of state. We would argue that delaying the supply of housing via the Liverpool Method is the antithesis of the approach advocated in the framework.

This interpretation was supported in an inspector's decision on a scheme at Honeybourne, Worcestershire (DCS Number 100-079-014). The inspector said: "In my view, it is inconsistent with planning for growth and the NPPF paragraph 47 to meet any housing shortfall by spreading it over the whole plan period. Clearly it is better to meet the shortfall sooner rather than later."

However, in a decision from Barwell in Leicestershire (DCS Number 200-000-418), the inspector favoured the council's more cautious adoption of the Liverpool Method, in anticipation of a slow and steady economic recovery over a protracted period. Such inconsistency on the part of inspectors does not help decision-makers.

Christopher Rees is a director and chair of Savills Planning's strategic land group

FACT BOX

- Both methods are defined as good practice examples in the May 2009 Land Supply Assessment Checks report prepared for the Department for Communities and Local Government (DCLG).

- If there is no housing shortfall, then only the Liverpool Method is used.

- The NPPF and the DCLG's online planning practice guidance seek to ensure up-to-date assessment of development needs based on housing market areas. This may alter the housing requirement and hence the five-year supply assessment.


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