The first things the new Communities and Planning Secretaries will have on their plates (potentially after an election) is responding to the HOC PAC report on Planning and the Broken Housing Market
The Department has a highly ambitious target to deliver 300,000 new homes per year by the mid-2020s but does not have detailed projections or plans on how it will achieve this. Meeting the target of 300,000 new homes a year will need a significant step-up in the level of house building. Current levels are not promising: the number of new homes has increased every year since 2012–13, with 222,000 new homes in 2017–18, but the average number in the period 2005–06 to 2017–18 was still only 177,000 a year. The Department accepts that it will need to transform the housing market to get more new homes built and says that achieving the target would be “very challenging”. Despite having introduced some projects to help, including encouraging small builders through the small builders guarantee scheme and reforming the planning system, the Department simply does not have the mechanisms in place to achieve the 300,000 target. This is compounded by lack of detailed rationale as to why this target was chosen in the first place. It also lacks year-on-year projections on how it will ramp up house building, only illustrative projections which are not in the public domain. To make this even more concerning, the target does not align with the Department’s new method for calculating the need for new homes which shows that just 265,000 new homes a year are needed.
Recommendation:By October 2019, the Department should set out, in a single publicly-available document, the full set of actions it is taking to achieve the target of 300,000 new homes and include year-on-year projections for the number of new homes it expects to be built.
This will be an extremely useful exercise in civil service contingency planning. To do a GAP analysis on why the 300k target is not being met. In the same timescale the London Plan panel will be reporting, showing a likely huge gap between what London needs and what it can build creating a huge overspill issue for ROSE and the Camkox arc.
There are too aspects to the problem which are interrelated. Housebuilders find it hard to build on land not zoned for housing; but despite the NPPF making this easier a large uptick in consents has not, over time. led to a proportionate uptick in completions. The central issue of the Letwin review. The governments standard method has taken one cause of delay from the system but as the PAC says (and the governments says) it doesn’t tally to the 300k target only adding up to 265k homes (assuming 2014 based HH projections).
This is deeply unsatisfactory because despite the government and ONS protestations about the 2016 based HH projections it still allows anti growth protesters (witness the latest local elections) to claim the figures are ‘grossly inflated’ despite current growth deals containing zero ‘arc uplifts’ or uplifts from transfers from ‘land constrained’ areas (such as London).
As the PAC report says:
While the Department does not have detailed calculations as to why the target was chosen, it told us that the figure was based on a number of studies including Kate Barker’s work of 2004 and the Lyons review, which suggested 250,000 new homes and above and close to 300,000 are needed to stabilise prices. The target does not align with the Department’s new method for calculating the need for new homes which shows that just 265,000 new homes a year are needed
This is a mess. Lets track back over two governments and in that time two methods have been used to estimate how many houses were needed to stabilise house prices. The first used the departments own econometric model and the former NHPAU estimated it needed around 12% uplift nationally to do so. Under Cameron despite the NHPAU being abolished the issue didn’t go away and as part of the LPEG report a crude formula based spreadsheet was used to redistribute housing numbers away from poorer paying regions to higher paying ones, even though it meant in many cases lowering housing numbers below need in fast growing northern cities (see this report on the dramatic unjustified deletion of 20,000 homes from the Leeds Local Plan) and redistributing the numbers towards land constrained areas such as London Boroughs. The implication was vast economic migration away from cities where people could get a job but not a house towards London where you would be far less likely to afford a house. It was crazy and with the 2016 based household projections even implied negative household growth in ,many fast growing areas.
The unsatisfactory nature of the current method for setting targets is that the MHCLG has stated it still uses economic modelling for roughly estimating the 300k target but not for setting local plan based ones. If you want to start your gap analysis this is a good place to start. Running the MCHLG affordability model on the 2016 HH baseline and then investigating what would happen if HH formation had not been constrained by the housing stock (which dates back well before 2014) using a new baseline for stabilising affordability (the NHPAU used 1987 the government could now use 2010) would give you around 300k units. What is more if you could apply such a model around functional economic regions, there now being enough data to do so . This could replace the crude standard method spreadsheets. You could do so in land constrained and unconstrained modes (using GIS data) and Green Belt off and Green Belt on modes. The difference being the ‘strategic planning problem’ the amount of overspill growth corridors such as those around London would have to accommodate on top of local demographic targets.
Drilling down to functional housing markets is essential because a gap analysis between the sub-regional need and completions will be different in each. For example South Hampshire – European sites nitrates issues, Northampton, slow delivery on SUEs and capacity issues on the M1 leading to resistance to creating new ones. Understanding these gaps is essential to the government tayloring what replaces growth deals with appropriate locally applicable sticks and carrots. For example one sub-region I know well South Essex. money towards re-routing of the A127 in key areas, and adding a multimodal tunnel to the East Thames River Crossing could open up at least four strategic growth locations.
Here the government could commission a swift series of reports for each subregion/joint planning area/functional city region with consultancies which specialise in each to find out what these gaps are and what the most appropriate stick and carrots to resolve growth resistance.
In terms of the gap between allocation and completion I think the understanding of the ministry has come on leaps and bounds in recent years. It now knopws to look for comparators either overseas and in the past about when and where completion rates were high. It is easy to see when and where it was, when there were master developer masterplanned communities releasing parcels to several housebuilders at once, as in the last phase of Milton Keynes expansion.
With many authorities now needing to hit uplifts in their housing completions anywhere between 600-1500/annum that implies one or more master-community type developments, either extensions or freestanding garden communities. We therefore face a ‘garden communities gap’ . So far nationaal competitions etc. have failed to fill that gap with all but one or two such winners already planned in local plans. What is needed is a more sub-regionally based series of initiatives. Here is where the Oxford Cambridge growth corridor has been such a disappointment. It gave the impression that the government was going to be proactive in helping to identify where the garden communities gap could be filled, in the corridor or greatest need and left it all to local authorities, who promptly went backwards in a reflex of local fears about locations, sustainability and infrastructure.
This is against the context of concerns for zero carbon development, something that can only be achieved with new zero carbon transport and energy infrastructure, for which there are no integrated regional studies anywhere in the UK.
What is more the garden communities gap requires filling of the master developers gap. There is a shortage of master developers and Homes England has in some cases stepped in on some long zoned but slow progress sites. I know many strategic sites where country solicitors are filling in the master developers gap (badly).
An obvious way of filling this gap is tasking Homes England to prepare regional action plans on homes and infrastructure about where the greatest gaps between need and completions are and what the options for bridging this is. Of course new joint planning bodies would choose following SEA from the options but what we have seen so far is a morbid fear amongst them of even publishing the options – some are year or two late – for fear of a mighty backlash. Homes England here could act as a buffer, allowing daylight to appear on what many in the planning community have long felt to be the strategic options, whilst insulting local politicians from having the temerity for even having thought of them.
Decisions, Decisions, Decisions 