Should Objectively Assessed Need Include a ‘Policy on’ or ‘Policy Off’ Employment Growth Assumption

Not a straight forward question to answer especially if you happen to live in Oxfordshire where the difference between the two doubles the housing numbers.  Lets take the arguments step by step then assess the current debate.

There is no doubt from NPPG that there should be an assumption of balance between job growth and housing growth.

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How should employment trends be taken into account?

Plan makers should make an assessment of the likely change in job numbers based on past trends and/or economic forecasts as appropriate and also having regard to the growth of the working age population in the housing market area. Any cross-boundary migration assumptions, particularly where one area decides to assume a lower internal migration figure than the housing market area figures suggest, will need to be agreed with the other relevant local planning authority under the duty to cooperate. Failure to do so will mean that there would be an increase in unmet housing need.

Where the supply of working age population that is economically active (labour force supply) is less than the projected job growth, this could result in unsustainable commuting patterns (depending on public transport accessibility or other sustainable options such as walking or cycling) and could reduce the resilience of local businesses. In such circumstances, plan makers will need to consider how the location of new housing or infrastructure development could help address these problems.

I dont think this is necessarily that clearly or simply worded.  What ‘assessment’, what ‘assumptions’?  It gives examples of how things can go wrong without a clear statement of what the baseline employment assumption is and whether that forms part of OAN is is a ‘policy on’ assumption on top of that.

The PAS guidance goes a little further with a useful case study.

From Inspector’s advice, for example in Bath and North East Somerset (BANES), it is clear that future labour market requirements cannot be used to cap demographic projections. In other words, if demographic projections do not provide enough resident workers to fill the expected workplace jobs they should be adjusted upwards until they do. But if the demographic projections provide more workers than are required to fill the expected jobs, they should not be adjusted downwards. If both a job-led projection and a trend-led demographic projection have been prepared, the higher of the two resulting housing numbers is the objectively assessed need. The rationale for this, as explained by the BANES Inspector among others, is that much of the demand for housing is not driven by job opportunities, and people who do not work also need somewhere to live.

Bath and North East Somerset Core Strategy Examination, Inspector’s preliminary conclusions on strategic matters and way forward – June 2012 , 

But a quite different conclusion was reached recently in Leicestershire.  (S62a/2014/0001) in relation to a case in Leicestershire, Inspector Jonathan King stated that a FOAN (SHMA) must be ‘policy-off’

So do we use the BANES method or the Leicstershire Method?  Sigh this could take over from Liverpool v Sedgefield in planorak tedium.

Ok lets take things from first principles.  It is quite legitimate in my view to set an OAN ‘policy off’ baseline and then add various policy assumptions.  But it is important if you do so that the OAN baseline is accurate and reflects a plan which might be found sound.  The fundamental national policy is that OAN is met in full. So a baseline must reflect economic growth that meets national policy and is not policy constrained.  Such as constraints from lack of housing.  However if an LPA wants to adopt an aggressive job creating go for growth policy on top of ‘normal’ growth that is a ‘policy on’ assumption after OAN.

There is a flaw in the BANES approach mentioned by PAS.  If one LPA is a growth node that adopts a jobs led approach to employment growth – but is constrained so it can develop all the housing this implies, and the another is a net commuting authority that accepts the housing overspill under the DTC but adopts a more housing led approach capping jobs because it is an unsustainable location for major employment growth then surely this is fine as the two balance out net.  However if you adopted the higher of the two on the BANES principle you would systematically oversupply.

That is the problem with the BANES principle.  The OAN just wont add up over a HMA or nationally to hit global OAN.

In the short run all housing targets need to be housing led as it is not easy to move, in the longer run however they need to be jobs led as people who can move to work will.  It is acceptable therefore to mesh housing led and jobs led approaches as long as you are consistent across an HMA and with net migration assumptions and don’t constrain housing and jobs growth in the ‘policy off’ baseline.

Certainly some of the Oxford SHMA assumptions based on a Cambridge Economics model look like double counting as some of that growth would have been part of the baseline. Also some of the assumptions seem odd and some of the criticisms of CPRE unjustified.  It includes a backlog figure against SEP targets.  Whenever you have new census and national household projections this resets the household formation figures and to include a backlog against a dated plan can result in double counting.   There is a long thread on the PAS forums on this including a comment by a ONS statistician in support of the double counting point.   However as well as meeting new household formation you also have to meet a backlog of housing for people in existing household who would form a household if they could afford to do so – concealed/suppressed households.  The guidance on this latter point is quite clear.