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Housing requirements set to worsen affordability
Published September 19th, 2017
The worsening affordability of housing across the country has led all political parties to call for more housing. The Government has promised more housing to be delivered through Local Plans but its recent consultation on the issue has surprised the development industry by proposing a reduction in housing requirements across the West Midlands, the North West, Yorkshire and the North East.
It is widely acknowledged by economists and others that England’s high housing costs are related to chronic under-provision of housing over the past 30 years. The amount of housing built is directly affected by local planning authorities who set a housing requirement in their Local Plans. Housing requirements have been a political football for many years and creates lengthy debates and delays in the planning system.
To resolve these problems, the Local Plans Expert Group set up by the Government in 2014/15 recommended that a standard methodology be adopted to guide the calculation of housing numbers.
DCLG consultation on calculating housing needs
The Government published the long-awaited new methodology for calculating housing need on September 14, 2017, inviting comments by November 9. Under its proposals, the new methodology will take effect from March 31, 2018 for local planning authorities which do not have a recently adopted Local Plan or who are in the process of preparing a new Local Plan.
The proposed methodology increases housing requirements in the south-east and south-west, but causes a reduction in housing numbers across much of the rest of England. This has surprised and angered many in the Midlands and the North, who feel the London-centred approach has ignored the rising cost of housing across the rest of the country.
Proposed methodology for housing requirements
The Government’s proposals use the official household growth projections published by the Office of National Statistics as the basis of housing calculations, with a simple adjustment to reflect market signals based on the ratio of median house prices over median earnings (the local affordability ratio).
The adjustment for market signals calculation is the local affordability ratio minus 4, divided by 4, multiplied by 0.25. For example in Shropshire the ratio of house prices to earnings is 7.67, which results in an adjustment factor of 22.9% increase over the demographic projection [(7.67-4)/4 x 0.25]. However by far the more important part of each local authority’s housing need is the demographic projection.
The housing needs figure is based upon the demographic projection for the Local Plan period concerned, and is only as good as this projection. Demographic experts have in the past expressed serious concerns about the Government’s over-simplistic approach to this complex subject, but it appears that the Government has ignored their concerns. The normal adjustments, for example to convert ‘households’ into ‘dwellings’ and to allow for local factors will be swept away by the new methodology.
The impact of the proposed methodology is to reduce housing requirements in most parts of the northern half of England. For example, Cheshire East’s housing requirement would drop from its current 1,800 homes per annum (as recently determined by a rigorous Local Plan process) to 1,142 homes per annum, a reduction of 37%. Cheshire West & Chester’s housing requirement would drop from 1,100 dwellings per annum, as established by the Local Plan Inspector in 2015, to 680 dwellings, a reduction of 39%. Under the new methodology, Shropshire’s figure would be 1,270 dwellings per annum, a drop of 9% relative to its current Core Strategy figure of 1,390 dwellings per annum.
Local authorities with aspirations for economic growth and many others have already expressed concerns about the Government’s proposed new methodology. We share their concerns and encourage you to look at the proposals in more detail. The Government’s consultation can be found at https://www.gov.uk/government/consultations/planning-for-the-right-homes-in-the-right-places-consultation-proposals
For further information please contact Helen Howie MA (Hons) MCD MRTPI, Planning Consultant at the Shrewsbury office of Berrys on telephone: 01743 239028 email: email@example.com