Sajid Javid recently announced a consultation on a standardised methodology for assessing local housing need. The broad basis of this proposal, which was originally included in the Housing White Paper in February, is aimed at helping local authorities plan for the right homes in the right places.
What is it for?
As the consultation document initially sets out, the root cause of the dysfunctional housing market in this country is that for too long we haven’t built enough homes. The Government is aiming to deliver 1.5million new homes between 2015-2022 and is attempting to create a system which is clear and transparent for local authorities and avoids the unnecessary wasting of time and money. The new methodology will apply to all future plans, with the exception of those which have been submitted or will be submitted before 31 March 2018, which is due to coincide with the publication of a revised NPPF.
The standard methodology is principally aimed at tackling problems of affordability as the proposed formula simply uplifts the household projections figure, based on market signals. An affordability ratio would be devised for each local authority which is based on local median house prices to median work-place earnings. Whilst a simple formula may provide clarity for local authorities there is the potential for it to present unjustified results if it isn’t sufficiently refined.
What is the result?
Alongside the consultation document, the government have also published a housing need data consultation table which demonstrates what the formula would mean for housing need for each authority in England. Of the 328 authorities, almost half would see an increase, and 77 of these would be by over 20%. However, the vast majority of these are in the south east where authorities have consistently failed to reflect the issue of affordability in compiling their own objectively assessed need (OAN).
Of the 144 authorities which would see a decrease, most of these are located in the north generally, and specifically the north west. Where Local Plans have been adopted in these areas, the housing figure has often been uplifted to reflect employment targets, affordable housing need and high levels of commuting. The standard methodology takes no account of these important factors.
Directly at odds with the growth agenda
The approach to the standardised methodology is therefore directly at odds with the stated aims of the Northern Powerhouse and the Greater Manchester Spatial Framework (GMSF). The very first paragraph of the draft GMSF, which was consulted upon at the end of last year, refers to a jobs imbalance between the north and the south and confirms that growth in jobs and population is fundamental to addressing this.
In fact, the day before the publication of the standardised methodology last week, a review was published on behalf of Homes for the North (H4N) stating that a total of 500,000 homes over a 10 year period are required across the north of England. The analysis also highlights that the majority of OAN identified across the North of England are on average 87% greater than past delivery trends over the last ten years. The Report confirms that:
‘This is a consequence of the majority of Local Authorities identifying an OAN based on an economic-led future scenario which requires a significant uplift for most Local Authorities in respect of delivery.’
Given the population decline and the impact of the recession on the north, this isn’t wholly surprising. However, in order to meet the economic ambitions of the city regions in the north a significant increase in the number of homes is required to support a growth in the economically active population to take up new jobs opportunities and deliver economic growth.
In light of this it is somewhat strange that the Government is putting forward a methodology for assessing housing need, which for Manchester City Council, often considered to be the driving force behind the Northern Powerhouse, would see a 15% drop in the housing need figure. In fact seven of the ten authorities which make up the Great Manchester Combined Authority would see a drop if using this methodology.
Just a starting point?
The consultation document does allow for authorities to put forward proposals for a local housing need above that which is generated by the standard calculation. However, if this is to be discretionary then it is likely that only forward thinking Councils would adopt this approach and many will take the easier political decision to opt for the lower target.
It is understandable that the Government is attempting to reduce the burden on local authorities and speed up the process of generating a figure for housing need. Other policies in the Housing White Paper included the introduction of five yearly plan reviews and a standard methodology would make this process much easier, and may well speed up the delivery of new housing.
However, it is clear that the proposed standard methodology could severely stunt the growth ambitions of several regions in the north of England and may prevent the much-needed investment in key infrastructure projects. The Government must consider a more refined methodology which takes factors other than market signals into account, particularly in light of economic uncertainty in relation to Brexit.
The Government may also need to consider the variety of issues which affect different regions of the country. One solution may be for each city region to agree its own calculation with the Department for Communities and Local Government and consult individually.
Either way the provision of a top down figure which appears to eschew the principles of localism should be avoided if the economic imbalance between north and south is to be addressed. At the very least, the leaders of the GMCA must reflect on the fact that the standard methodology is inadequate for needs of the GMSF.