A Simple Fix to the Standard Housing Method – Don’t Project Household Formation – Forecast it

The problems with the new standard method (post 2014 baseline fix) are well known

-Following the OANishambles it has no method for handling changes to household formation

-The reconciliation to the national 300k target is a bodge (reference recent select committee report)

-In many fast growing midlands and northern areas it reduces OAN below need (because of its affordability global fudge factor).

I now think I have stumbled across a simple fix:

Step One – For each HMA model demographic change without migration or change to household formation.

Step Two – Forecast not project changes to HH formation and net migration based on a national economic model with balanced HMA level outputs – which forecasts the impact locally of national economic, infrastructure etc. policy.

I dont know if we will ever have  national plan like Ireland but step two essentially derives from the kind of regional economic modelling done in Ireland.

It allows senior politicians to say to understand if you take decisions on x,y,z regional investment and any constraints to balancing labour and housing markets what impact this has on migration and household formation.  It stops the kind of planning by unfounded 20 year assumptions approach adopted by for example John Prescott who believed housing growth in the South could be reduced over 20 years by investment in the North (instead we had under development of housing and infrastructure in both).

Planning is about tough choices.  It is hardest in areas where the imbalence between the housing and labour markets is greatest.  The impact of national policy should be explicit in any system of planning.


Questions for Inspectors on Build out Rates in Local Plans

Inspectors at Local Plans have to make many quantitative throw a dart at a board issues; thankfully far less so with the standard OAN method.

In turn with the standard method increasing annual completions rates to well over 500/annum, and double that in many cases local planning authorities are looking at strategic locations such as Garden Communities to boost build out rates given that the gap between permissions and completions on scattered small sites looks like, from the evidence gathered, like pushing on a string less and less effective as it racks up.  One major mistake many LPAs make is spending a couple of years developing a DPD or SPD on principles for a strategic site rather than working partnership with the developer on the masterplan.

Of course the fact that you allocate a large at strategic site doesn’t necessarily mean it will be commenced, look at Northampton where a 40 year dither over a ring road has led to massive delays and the abolition of a development corporation whose perhaps one task should have been to deliver that.

Even if you get to completion of unit one there remains the issue of build out rates.  The assumption of build out rates in many local plans is exaggerated with housing trajectories massaged to make it appear there is a 5 year supply when in fact build out has been slow.  Strategic sites are a special case in that there have been certain circumstances where they have been high.

Particular focus has been on the  Nathaniel Lichfield & Partners – Start to Finish: How Quickly do Large Scale Housing Sites Deliver, an excellent report however its application in examinations and inquiries has been crude, simply using it as a national average rather than examining whether a site or area is likely to fit into a particular performance band.

A useful additional literature review is provided by the North Essex Garden Communities Report Build out rates in the Garden Communities

The Start to Finish report, focuses primarily on housing building during a recessionary and post recessionary period. Economic cycles are cyclical but it is not a sound approach to base the build out rates of the Garden Communities solely on data which is skewed towards the post-recessionary period.

The report also looks at the Letwin Review and Savills Research – What Next for Housebuilding?

It lists a number of factors the literature review shows influence build out rates

Market absorption: i.e. the rate at which newly constructed houses can be sold into the local market:
o size of site, i.e. the absolute number of units being delivered
o ability to diversify housing products, e.g. type, size, tenure;
o price of housing product relative to local new build market;
o local competition;
 Timing and certainty infrastructure provision, i.e. schools, transport, etc;
 Strength of the local housing market; and
 Site specific constraints: difficulties with land remediation; delayed installation by utilities companies; constrained site logistics; limited availability of capital; limited supplies of building materials; limited availability of skilled labour.

I think you can be far more specific though on the underlying factors which lead to an accelerated build out rate.

  1.  Whether a strategic site is delivered by an experienced master developer with multiple points of sale
  2. Whether any master developer partners with multiple housing developers in parallel parcels
  3. Whether a development corporation has been involved in site assembly and/or strategic infrastructure provision.
  4. Whether the structure of the growth area enables multiple strategic sites to progress in parallel
  5. Whether housing developers have developed partnerships with build to rent providers and RPs to develop a range of products with a high % of units of tenures not affected by absorption rates
  6. Whether MMC is used.

You can see the impact of many of these in the literature review though this doesn’t always tease out the key reasons, such as the involvement of a development corporation in Milton Keynes.

I can remember one discussion with a consultant from Hyder who was recommending that the most conservative assumptions should be used on all of these fronts and I was recommending that international best practice should be applied on all front and the SOAN demanded a step change in delivery.  He conceded that perhaps we need a new way in England as the traditional ways were broken.

This report makes a convincing case that build out rates greater than 250/annum are achievable, though it is somewhat shilly shally on the need for a locally led development corporation.  It uses to back up its case

Strategic sites around the country have been planned and delivered at rates significantly higher than 250dpa, most notably at sites in and around Milton Keynes, Otterpool Park, and Harlow and Gilston Garden Town

All of which apart from Otterpool Park have gone through the examination process.

Given that we know large sites delivered in a poactive way  produce large completions uplifts we need not wail and moan about solutions to the housing crisis.  What we need is a proactive approach to encouraging local planning authorities to do this.  A hint of this was in the Oxfordshire Housing Growth deal – if you plan to meet your housing need in full and strategically then you can apply a 3 year HLS.

With the OAN now fixed and growth deals dead the HCHLG needs to amend and universalize this approach through an amendment to the NPPF, saying something like

‘where the nationally set OAN is to be met in full, either within a local planning authority or distributed through a memorandum of understanding embedded in proposed strategic policies then the required housing land supply shall be three years rather than five, for a maximum period of two years from agreement of the housing levels (in an MOU or by resolution on on an LDS), or submission of the plan for examination, whichever is sooner.

Government should also make clear that they will not enter discussion on infrastructure funding in any form unless such resolutions have been made.