The implications of the proposed new standard housing need method

The housing ministry is set to introduce a revised standard housing need method. But commentators say areas in the Greater South East that would experience the biggest increase in housing need are likely to struggle to meet their much higher targets, while authorities in the north would still be subject to requirements that are too low.

Housing need: changes proposed
Housing need: changes proposed

Alongside its much-heralded Planning for the Future white paper, the government published another, slimmer consultation document. Entitled simply Changes to the Current Planning System, it puts forward proposals for four short-term changes to the planning system. Likely to be the most significant of these for most local planning authorities is the proposed change to the government's standard methodology for calculating housing need.

The so-called standard method, which is used by authorities to calculate their annual housing need for plan-making purposes, currently yields a national total of 270,000 homes in local plans, someway short of the government's 300,000 homes a year target. Using the proposed new formula, the modified standard method would yield a national total of 337,000 homes a year, thereby leaving a margin of error of more than ten per cent. This would, the document states, account for the fact that "not all homes that are planned for are built".

In order to get there, the methodology has been changed in several important ways (see panel below). Currently, the formula baseline, the first stage of the calculation, is based solely on household projection figures from the Office for National Statistics. But under the proposed method it would be the greater of either household projections or 0.5 per cent of the area's existing housing stock.

Secondly, there has been a strengthening of the affordability uplift, which aims to boost housing supply in the areas of highest demand. But perhaps most importantly, the new method has removed the current cap, which stipulates that each council's housing requirement should be no more than 40 per cent higher than any figure adopted by the local authority within the last five years. The government said it will implement the changes through revisions to its Planning Practice Guidance following the consultation.

The point of the cap, according to Cristina Howick, a planning director at consultancy Stantec, was to prevent numbers from getting "ridiculously large". Its removal results in the "biggest difference" in the new formula compared to the current version, she said, adding: "They want to get the total number up – it's another turn of the screw."

Removing it has, in part, led to some pretty eyewatering figures, especially for authorities in London and the South East. Analysis by planning consultancy Lichfields shows that the biggest increases will be seen in London, which will be expected to deliver 93,000 homes a year, up from 56,000 under the existing standard method. Meanwhile, the ten authorities with the biggest increases in annual housing requirements are all London boroughs. However, as long as the London Plan is in place and less than five years old, the boroughs would be subject to the lower housing targets contained in the strategy.

Meanwhile, Stantec compared the housing need figure calculated using the revised method with the number of units actually delivered in each of England's authorities in 2018/19 (see map and table below). The gap in London boroughs is huge, but it is also massive across the vast majority of authorities in the South East and East of England. In Gosport in Hampshire, for example, the housing need figure is 561 per cent higher than the number of homes it built in 2018/19. In Brighton and Hove, the equivalent figure is 400 per cent. "It piles loads more numbers in the greater South East and the edges thereof," said Howick.

Conversely, Stantec's analysis shows that there are several authorities in the Midlands, North West and North East, including Salford, Newcastle and Carlisle, where the revised local housing need is less than half of the number of homes built. "This is stupid because it suggests that they have been building houses in excess of their needs, but logically that doesn't make sense," said Howick. "They've been built because the market conditions are such that somebody will buy them." Andrew Lowe, senior planner at Turley, added: "[The method] is very accepting that the north can deliver fewer homes than it has done in the past when in reality it can make a much bigger contribution to national housing need."

In terms of the huge increases seen in the Greater South East, Richard Crawley, programme manager at the Local Government Association's Planning Advisory Service, is concerned about the deliverability of the new housing need figures produced under the revised method. Under the housing delivery test, local authorities are penalised if insufficient new homes are created in their area as measured against their annual housing requirement. "The new numbers sharpen the focus on the question 'how?'," he said. "It is naive to imagine that councils receiving a number that is a multiple of the best year of delivery they have ever had are able to magically increase completions to meet it."

Howick and Lowe both said they thought it likely that authorities facing sharp increases in need would, where applicable, increasingly seek to allocate green belt sites for housing in their local plans. But Catriona Riddell, strategic planning specialist at the Planning Officers Society, believed the worst affected authorities may be likely to down tools. Partly, her reasoning is that if you set somebody an impossible target, it is likely to be ignored. Secondly, Riddell also pointed to further longer-term changes to the standard method outlined in the Planning for the Future white paper, which was published alongside the consultation document. These suggest that authorities, especially in the Home Counties, would eventually face lower housing requirements, she said.

The white paper proposes that councils' mandatory annual housing requirements will be adjusted in order to take account of local constraints, such as green belt, which the current standard method does not do. As a result, "certain places" around the South East might "not bother" with the short-term changes, said Riddell, adding: "Why would you press ahead with these horribly high numbers when potentially there is something coming down the road that might let you off the hook a bit?"

 

HOW THE STANDARD METHOD WOULD CHANGE

Current method

Authorities use the latest Office for National Statistics household growth projections for their area over the next ten years as a baseline figure.

This is then adjusted according to an affordability ratio, which measures the difference between house prices and annual earnings.

The resulting housing need figures are capped at 40 per cent above any housing requirement adopted by the local authority within the last five years.

Proposed method

Levels of existing housing stock should be taken into account alongside future household projections, the consultation document states. The higher figure of either 0.5 per cent of their existing housing stock or the latest household growth projections should be used as the baseline for housing need.

In addition to applying the ratio based on how unaffordable an area currently is, there is a further uplift based on the change in the ratio over the last 10 years.

The 40 per cent cap would be removed because, the document states, it "artificially suppresses the level of housing identified".


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