Mystery Solved – Why the Government’s OAN Method Produces Reduced Numbers in the Places of Highest Need

One of the perverse features of ‘ Planning for the right homes in the right places’ is that it suggests lower housing numbers than SHMA need in places like Oxfordshire and Cambridge City that are crying out for more housing.

Its a mystery but I think I figured it out.  The clue is the areas in the South East in blue below are areas that have had little house building relatively and are highly constrained.  Take Oxford for example which did not experience a late Victorian wave of terraced housing.

This has impacts on the formula in two ways.  First on the demographic base – if this is low the projection of that base is low.  And as this is a household not homes requirement it will always be below need.  Secondly the adjustment for affordability.

 

 

 

 

 

 

 

 

 

Consider the formula.

‘ We propose that as the next step in the standard method, plan makers
should use the workplace-based median house price to median earnings ratio from the most recent year for which data is available.’

The problem here it uses the whole population rather than say the lower quartile used conventionally in affordability calculations.  This produces a distorted metric of affordability in these areas.  In areas where low paid workers cant afford to live and have to commute in the metric produces a lowering of housing need rather than as it is an increase.  An issue worsened by the fact that the method is housing led rather than the jobs led method used predominantly in SHMAS.

Hence the method produces a perverse feedback loop of less and less relative amounts of housing in areas where lower paid workers can’t afford to live.

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