The authorities facing tough housing delivery test sanctions

The new housing delivery test comes into force in November. What changes does it introduce, and how are two councils with a history of low delivery rates aiming to avoid its sanctions. By Adam Branson and John Geoghegan.

Housing: new delivery test comes into force in November
Housing: new delivery test comes into force in November

It is now little more than six months until the new housing delivery test for England comes into force in November. With little time remaining for local planning authorities to prepare, research by Planning shows that the test’s penalties could apply to almost half the councils up and down the land this November.

The test assesses housing delivery by comparing official figures for the number of new homes delivered over a three-year period to councils’ housing requirements during the same time. Sanctions are to be imposed on councils that fail to meet enough of their requirements.

First outlined in the December 2015 National Planning Policy Framework (NPPF) consultation, more details of the test were revealed in last year’s housing white paper, including suggestions that the authorities who had the lowest delivery rates would face the prospect of having the NPPF’s presumption in favour of sustainable development applied in their areas.

March’s draft revised NPPF, new draft planning policy guidance (PPG) and a draft "measurement rule book" added further details and made some key changes to the previously proposed methodology. These documents confirmed that the test’s sanctions would come into effect this year, with local authorities delivering below 25 per cent of housing need in the three years to March 2018 facing the presumption penalty from November. Authorities will have to show that they have delivered at least 45 per cent of housing need in the three years to March 2019, and 75 per cent in the three years to March 2020, to avoid the presumption penalty in November 2019 and November 2020 respectively.

In November 2018, where the test has indicated delivery in the three years to March 2018 of below 95 per cent, the draft PPG says an authority should prepare an action plan "to assess the causes of underdelivery and identify actions to increase delivery in future years". Also from November 2018, where delivery has fallen below 85 per cent, it says councils must plan for an additional 20 per cent buffer on their housing land supply.

Click here to enlarge the map below

The rule book states that, for councils with an adopted local plan less than five years old at any point of the measurement period (so from April 2015 to March 2018 for this year’s test), the housing requirement figure will be either the target in their plan or the local housing need figure for the three-year assessment period, whichever is the lower. Planning authorities’ housing need up until the end of March 2018 will be calculated using the government’s household growth projections. Their need from April 2018 onwards will be calculated using the government’s new standard housing need assessment method. If the council has no up-to-date plan, they will have to use the local housing need figure.

The methodology detailed in last month’s draft rule book makes some further key changes to what was previously announced. It confirms that the housing requirement figure can change within a three-year period, and even between yearly measurements, if a plan with a new housing target is adopted during that time or an adopted plan becomes out-of-date.

Meanwhile, for the delivery figures, the rule book proposes that the test will firstly use the government’s net additional dwellings figure. But it proposes that authorities will also be able to count net additions of "communal accommodation", including student housing, towards their housing delivery figures. In addition, Planning understands that housing targets in local plans adopted after the three-year assessment period ends would be used to calculate delivery in that assessment period if the plan period extends back into the three years in question.

Jonathan Dixon, an associate director at consultancy Savills, says that the inclusion of communal and student accommodation will, in most authorities, result in an increase in housing delivery figures. "In some areas, this could be only a small increase; in others, potentially a much greater increase," he says. Elsewhere, the new rule book confirms that councils, in calculating their housing requirement figure, will have to include any unmet need from neighbours that they have agreed to take on.

Given the complexity of the test, unsurprisingly, practitioners have raised some questions. One concern is about timing. Given that much of the detail about the delivery test has only been provided in recent months, authorities do not have much time to make any significant difference to housing delivery levels before November. "If you look at what authorities can do – because they don’t really build anything, it’s down to their plan processes and consents and giving consents faster and removing barriers to consents - it’s hard to see what they will be able to do to effect change," says Ben Simpson, a director at consultancy Boyer.

A further worry is about confusion, given the test’s complicated data requirements, which will require incorporation of fresh datasets each year. "The test should reflect the most relevant and up-to-date statistics," says Joe Sarling, associate director at consultancy Lichfields. "However, this may cause confusion when central government talks to local councils. Clear communication about which datasets are being used, and the rationale behind using them, will be crucial to reduce confusion."

Planning has analysed government data to produce our own evaluation of the likely impact of the test. Using MHCLG net housing additions data for the three years from 2014/15 to 2016/17, we produced a delivery figure for each council. To derive a housing requirement, we took the figure from the local plan where this was less than five years old at the end of March 2017. Where the plan was absent or more than five years old, we used MHCLG household growth projections for the same three-year period. However, if the up-to-date local plan figure was higher than the household growth figure, we used the latter, in line with the rule book guidance. Local plan targets adopted after April 2017 were only counted where the plan period extended back into 2014-17.

For London boroughs, we used whichever was the lower of either their local plan target, providing it was up to date at the end of March 2017, the 2015 London Plan target, or the household growth figure between 2014/15 to 2016/17.

Unlike the method the government will use in its first test announcement in November, which will use figures covering 2015/16 to 2017/18, our analysis covers 2014/15 to 2016/17. Also, in contrast with the MHCLG formula, we could not source data for new student or other shared accommodation, nor have we adjusted the housing requirement figure to take account of local plan targets that became out of date or were not yet adopted within the 2014/15 to 2016/17 period. In addition, our housing requirement figure does not include unmet need from neighbours, which, in some cases, the test data would incorporate. Nonetheless, our figures show which authorities would be vulnerable to sanctions if their delivery performance were to follow the pattern of the past three years, and is not affected by additional factors such as shared accommodation provision. Our methodology was informed by advice from a number of experts from the public and private sectors.

According to our analysis of the 2014-17 figures, just under half of authorities had a delivery rate of less than 95 per cent (see graphic) and would therefore have to prepare an action plan after November 2018 if those rates continue, unless adjustments for additional factors save them. But no authorities had 2014-17 delivery rates below the 25 per cent threshold, though 12 were under 45 per cent, which means they would face the most severe penalty if those trends carry on to April 2019, unless helped out by the additional factors. More than a third of authorities had a delivery rate of under 85 per cent in 2014-17 which, unless improved in 2015-18, or unless the additional factors help, means they would have to add a 20 per cent buffer to their housing land supply.

Our findings closely match those of Lichfields, whose research found that 53 per cent of authorities would escape a penalty under the test this year, with 47 per cent having to prepare an action plan. According to the consultancy, 37 per cent would face the 20 per cent buffer requirement, while none would fall below 25 per cent and thus face the presumption penalty.

Below, we examine the differing circumstances in two councils with a low current rates of housing delivery, and ask what each is doing to avoid penalisation.

London Borough of Redbridge

The Redbridge Local Plan 2015-30 was formally adopted by the council only last month. It follows the existing London Plan housing requirement for the borough of 1,123 homes per year, which means Redbridge had a delivery rate in 2014-17 of 32 per cent. This makes it the lowest in our survey, though the council still sits above the 25 per cent threshold, which councils will have to better in 2015-18 to avoid the application of the presumption in favour of sustainable development.

As one of the capital’s outermost local authorities, with one-third of its area covered by green belt, Redbridge faces constraints on its land not experienced by most London boroughs. One planning consultant familiar with the borough, who did not wish to be named, says that Redbridge’s adoption of its new local plan means that it would not be "immediately caught by" the draft London Plan’s target for the borough of 1,979 homes per year for the next five years. Without its new plan, the borough would have faced the need to meet this target when the new London Plan is adopted, which the mayor predicts will happen in 2019/20. Though the local plan proposes releasing five areas of green belt for development, the consultant says the amount released is not "significant" and the council will be "reliant on delivering their housing targets through greater density on remaining sites within the local plan".

Caroline Bruce, corporate director of place at the London Borough of Redbridge, insists that great strides have been made on increasing housing delivery in recent years. "The reasons for the historic low delivery rates are complex and are not peculiar to Redbridge," she says. "While it’s recognised that housing completions are still below target levels, there has been a sustained and significant year-on-year increase over the past three years and completions in the last year were the highest in more than ten years. Planning approvals are now broadly in line with delivery targets. However, we’re not yet seeing this increase reflected in actual completions by the private sector."

The council has introduced a series of measures to increase housing delivery, says Bruce. Its new local plan aims to provide for more than 17,000 new homes by 2030, exceeding the London Plan target and including a 20 per cent buffer for the first five years. The plan seeks to maximise the benefits of the arrival of the Crossrail project linking east and west London and support the delivery of major regeneration projects, including Ilford Metropolitan Town Centre and its mayoral housing zone.

In addition, Bruce says the council has established its own development company, Redbridge Living, to build new housing, is keen to maximise use of its own assets and is launching a development prospectus for Ilford to accelerate the delivery of 6,000 homes by 2020.

New Forest District Council

Our analysis shows that New Forest District Council had a delivery rate of 39 per cent between 2014 and 2017, making it the seventh-lowest in our list. With no up-to-date local plan, its average annual delivery rate over the three years of 231 homes was just under two-fifths of its household growth figures for the same period.

A council spokesman said there were "very significant environmental constraints in New Forest District", including the New Forest itself and other European Union-designated sites, which meant there was a "need to restrain development in the area". He added: "We have met the planned levels of housing delivery under the former regional plan, which was for 196 dwellings per annum. The draft methodology introduced for establishing housing requirements in the [draft NPPF revisions] has had the effect of almost trebling the housing requirement in the plan area."

To help increase delivery levels, the spokesman said, the council is at an "advanced stage" in reviewing its local plan and is on course to submit the reviewed strategy for examination "later this year". He added: "This will substantially increase housing numbers and meet the locally-derived objectively assessed need the council believes is relevant." In addition, the council is also identifying "significant additional land allocations", the spokesman added. "There is unlikely to be significant changes [in delivery rates] by November, but by then there will be clear evidence as to how the council is addressing this issue."

"The district council is limited in what it can do because of the existence of the national park," says Lachlan Robertson, South West planning lead for consultancy Carter Jonas. "We have some sympathy for the issues the local council is facing because of its geography." Another key restriction on meeting housing need is the district’s protected Dorset heathlands, Robertson adds, with government agency Natural England having "pretty stringent views" about any development close by. In addition, there are limited opportunities for the council’s neighbouring authorities to take some of its unmet need via the duty to cooperate, he says.

"You have a national test that inevitably has to be plain and simple if it’s to be used by everyone," says Robertson, "but you should have some flexibility to deal with difficulties at a local level."

Note: This article was updated at 10am on Monday 4 June to reflect the fact that we have revised our calculations having published incorrect figures at the end of April. Our initial calculations failed to take account of the fact that, under the delivery test, the government will use the lower of either the local plan housing target, if the plan is less than five years old, or the household growth projections. The new version of the article explains this as well as providing greater detail on the difference between our methodology and the government’s. The previous version of the article also identified Blackpool and Blackburn councils as two that had delivered under the 25 per cent threshold between 2014 and 2017. However, though both these councils had delivered under their local plan housing target during that period, they in fact delivered much more than their projected household growth figures and would therefore escape any penalty under the test.

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