Earlier this year the Government proposed a significant change to the way that housing need is calculated. In this blog we’ll take a look at what’s going to change with the Standard Method for Calculating Housing Need, the impact of this change on a regional level, and why this is significant for the future of housing delivery.
What is the Standard Method for Calculating Housing Need?
The Standard Method for Calculating Housing Need (the ‘Standard Method’) is the calculation that provides the starting point for projecting how many new houses each area in the country needs.
This projection:
- Underpins the level of growth that is required to be accommodated by housing allocations in an area’s local plan;
- It therefore also informs the amount of land required to satisfy the requirement for five years of housing land to be allocated; and
- It also provides the benchmark against which housing delivery is measured in the housing delivery test.
The Standard Method is important because it sets the scene for the level of housing delivery required by LPAs if they are to avoid the impact of the ‘presumption in favour of sustainable development’.
What’s changed?
The August consultations on the draft NPPF introduced a raft of changes, but most significantly for this topic, was the introduction of the mechanism in paragraph 152, which establishes that development in the green belt is no longer ‘inappropriate’ in certain circumstances if the ‘presumption in favour’ tests are not met.
This makes the satisfaction of the housing delivery requirements that are underpinned by the Standard Method even more important.
Alongside the NPPF consultation, the government has proposed changes to the way that the Standard Method works, moving from a calculation based on household projections to one based on an uplift to existing housing stock.
The old Standard Method was based on the 2014 household projections and involved the following:
- Baseline projections: The starting point was the projected household growth from the 2014-based household projections produced by the Office for National Statistics (ONS). These projections estimated the number of new households expected to form over a certain period.
- Adjustment for affordability: The method included an adjustment to account for local affordability, measured by the ratio of median house prices to median workplace-based earnings. This was meant to address housing shortages in areas where affordability was most stretched.
- Cap on increase: To ensure that the resulting figures were deliverable, there was a cap on the extent to which housing targets could be increased above existing local plans or recent delivery levels.
- Urban uplift: For the 20 largest urban areas a 35% uplift is added.
The new Standard Method moves away from being pegged to these 2014 projections and is based instead on the current level of housing stock in each area, suggesting an uplift from this baseline of 0.8% per year. Above this, an uplift is applied, based on a three-year average of the median workplace-based affordability ratio, with an increase of 15% for every unit above four.
What’s the impact of this change?
Handy for us, the government has already released their own analysis of the impact of this change.
These figures show that not only has the overall number of homes required by the Standard Method increased (from just over 300,000 to over 370,000 - a long way from the 2023 delivery total of around 230,000), but the balance of where these homes are required to be delivered has shifted around the country.
For example, as shown below, the total in London has been reduced - albeit not enough of a reduction to bring it to within reach of the historic housing delivery levels in the capital. In every other area of the country the Standard Method number has increased.
What is the impact of this in each region?
In this next section we look at each region in turn and provide an overview of the impact of the changes to the Standard in each region.
London
In London, the overall number of houses required by the Standard Method has reduced, but this reduction has not been felt equally across the city.
In nine boroughs (Bexley, the City of London, Hammersmith and Fulham, Kensington and Chelsea, Kingston upon Thames, Lambeth, Richmond upon Thames, Wandsworth, and Westminster) the number of homes required has increased.
Only in the City of London (current requirement 150, proposed requirement 151) has the historic delivery of 216 homes been sufficient to meet the Standard Method requirement.
Although most of the city will be feeling some reduction in delivery requirements, the areas that have seen an uplift in the Standard Method will still feel the pressure.
South East
In the South East of England, the Standard Method has increased the housing delivery requirements for most of the region. Only seven LPAs (Ashford, Dartford, Eastbourne, Medway, Slough, Southampton, and Thanet) have seen marginal reductions in housing need. Only four LPAs (Cherwell, Maidstone, Milton Keynes, and Vale of White Horse) have been historically delivering homes at a rate higher than their future Standard Method requirement.
East of England
In the East of England, the Standard Method has increased the housing delivery requirements for most of the region. Only six LPAs (Bedford, Central Bedfordshire, Luton, Thurrock, Watford, and Welling Hatfield) have seen marginal reductions in housing need. Only five LPAs (Bedford, Central Bedfordshire, Mid Suffolk, South Cambridgeshire, and South Norfolk) have been historically delivering homes at a rate higher than their future Standard Method requirement.
South West
In the South West of England, the Standard Method has increased the housing delivery requirements for most of the region. Only two LPAs (Bristol and West Devon) have seen marginal reductions in housing need. In Bristol’s case, this will be partially due to the removal of the 35% urban uplift. Only Tewkesbury has been historically delivering homes at a rate higher than their future Standard Method requirement.
East Midlands
In the East Midlands, the Standard Method has increased the housing delivery requirements for most of the region. Only four LPAs (Charnwood, Derby, Leicester, and Nottingham) have seen marginal reductions in housing need, largely due to the removal of the 35% urban uplift, which currently inflates the housing requirement attached to the top 20 urban areas.
Historic delivery in the East Midlands has been comparatively good, with around one third of the region delivering at a rate greater than their future Standard Method requirement.
West Midlands
In the West Midlands, the Standard Method has increased the housing delivery requirements for most of the region. Only three LPAs (Birmingham, Coventry, and Sandwell) have seen reductions in housing need, largely due to the removal of the 35% urban uplift.
Only five LPAs (East Staffordshire, Nuneaton and Bedford, Rugby, Stratford-on-Avon, and Telford and Wreckin) have been historically delivering homes at a rate higher than their future Standard Method requirement.
North West
In the North West, the changes to the Standard Method have increased the delivery requirement across the region. Some areas are shown to have reductions in the table here due to the way in which existing joint plan delivery targets for Greater Manchester have been averaged across the LPAs included within the Plan for Everyone.
Despite the fact that the 35% urban uplift has been removed from Manchester and Liverpool, there are only five LPAs in the North West that have been historically delivering homes at a rate greater than their new Standard Method requirement (Knowsley, Manchester, Preston, Ribble Valley, Salford, and Wyre).
Yorkshire and The Humber
In Yorkshire and the Humber, the Standard Method has increased the housing delivery requirements for most of the region. Only Bradford and Sheffield have seen reductions in housing need due to the removal of the 35% urban uplift. No areas in this region have been historically delivering homes at a rate higher than their future Standard Method requirement.
North East
In the North East, the Standard Method has increased the housing delivery requirements for most of the region. Only Newcastle upon Tyne has seen reductions in housing need due to the removal of the 35% urban uplift. Only sunny Darlington has been historically delivering homes at a rate higher than their future Standard Method requirement.
What does this mean?
Overall, the changes to the Standard Method mean that the number of houses that the planning system makes allowances for has increased. It also means that the location that these houses are thought to be needed has shifted away from London, and into the existing towns and cities around the country.
This is not because of an arbitrary 35% uplift in the top 20 urban areas as is currently the case (the areas that are currently wearing this uplift are: Birmingham, Bradford, Brighton and Hove, Bristol, Coventry, Derby, Kingston upon Hull, Leeds, Leicester, Liverpool, London, Manchester, Newcastle upon Tyne, Nottingham, Plymouth, Reading, Sheffield, Southampton, Stoke-on-Trent, and Wolverhampton).
The areas that have acquired housing need in this version of the Standard Method have done so because these areas already have the most housing stock and the new method is based on an assumed 0.8% growth in this existing housing stock.
Below are the top 20 LPAs that will see the largest uplift:
This gain in housing numbers is offset elsewhere, with some LPAs seeing their Standard Method calculations come down.
The LPAs with the largest reductions in housing need can be seen below:
Assuming that these Standard Method numbers, which form the starting point for agreeing an area’s housing need, are not departed from too greatly as they make their way into local plans, the impact of this change is more than an arithmetic exercise.
The practical impact of this change is that unless there is a step-change in delivery in most areas in the country, most LPAs are likely to fall under the Presumption in Favour of Sustainable Development.
The impact of this can be seen here on the following map.
The impact of this is going to be even more significant for LPAs that are affected by the green belt. The new NPPF makes it clear that where the ‘presumption’ applies, subject to the other policy asks in the Framework, green belt sites in ‘sustainable locations’ can be considered to be ‘Grey Belt’ where housing development is no longer ‘inappropriate’.
The message here is clear: houses need to be built. If green belt affected LPAs can’t plan for them to be accommodated in locations outside of their green belt, the Grey Belt is coming to turn them into development sites.