The Fall in Rate of Household Formation in New 2011 Based Projections

The planning community has been waiting with baited breath for the 2011 based projections due today and as expected they show a decline in household formation especially amongst the young.

So over 10 years the increase will be 221,000 households per year as opposed to 232,000 households per year, a fall of 4.7%.  Although technical adjustments to allow for frictional vacancies and demolitions etc.  will likely increase the ‘planning forecast’ figure to around 232,0o0 /annum, as opposed to around 243,000 / annum or so before.

So does this mean that LPAs can now reduce their housing targets by 5% or so (putting aside for a moment local variations).  Well why has the propensity to form a household fallen?

Looking at the figures you can see the greatest fall has been by younger people, absolutely for those aged 16-24 and relatively for those aged 25-34.  This is clearly recession induced, increased sofa surfing, stating at home for longer with parents etc.  A large part of this will show up in concealed households i.e. increased need for affordable housing, in SHMAs, however a proportion will be actual decreases in household formation without a corresponding increase in need for affordable housing, such as a young person choosing a local university and staying with parents rather than sharing a new household.  So it is likely that the levels of ‘general’ housing in targets will fall slightly and the increase in affordable housing need should already have been picked up in SHMAs.

Already the debate is shifting in EIPs to just how much of the affordable housing need should be accounted for in housing targets, should housing targets ‘boost’ supply in NPPF terms by providing above gneral market requirements in order a) to push prices down and b) provide more affordable housing as part of the 30% or so (whatever the local target is) of affordable housing.  The problem of course if just how much of this affordable housing could ever be funded, especially as such a small   proportion of the populace in high cost areas can afford ‘affordable rent’ and because of the low price elasticity of supply of housing.

Another factor to consider is that close interconnectedness of household and population increases with major increases in supply, anyone doubting this should note the ‘baby booms’ that have occurred in new towns as it becomes relatively easier to form a household and have a family when large amounts of relatively more affordable housing is provided, as recently in Cambourne and similar areas.

So overall the new figures show very little real slackening of housing need, rather its shifting in form due to the prolonged recession.

One area which will watch the new figures with particular interest is East Cambridgeshire, where the projection is for an 8,000 increase till 2021, whereas there recent draft submission plan based on a bottom up aggregation of village by village and town by town figures proposes far less than this.