Housing Need - 'The Numbers'
In a recent article we outlined our thinking on the many failings, together with some potential advantages, of the government’s proposed planning reforms. That article can be found here Planning For The Future.
Since we wrote that article the matter of housing reform has started to be debated in Parliament with prominent MPs across the political spectrum voicing their concerns. Theresa May (Conservative) and Zarah Sultana (Labour) gave very damning statements at that debate.
Here we expand our previous article by taking a somewhat simplified look at the various ways of assessing Local Housing Need (formerly known as Objectively Assessed Need, or OAN), as well as the government’s ill-conceived new approach, and the impact it will have on Billericay and Basildon Borough as whole.
Before going any further, it’s worth re-iterating that a Local Authority like Basildon, which is fortunate enough to have Green Belt designation for its countryside, does not have to meet its “Local Housing Need” if that means building on the Green Belt.
After all what’s the point of Green Belt designation if you have to build on it? Instead, Councils can set a Housing Target lower than Need, as Basildon eventually chose to do. Though of course they still chose to sacrifice very large areas of Green Belt, especially around Billericay.
It's only fair to the Council to concede that protecting all our Green Belt, while cut and dried in theory (the rules as laid out in black and white, and as proclaimed by MPs), it is more difficult in practice, for a variety of reasons.
There’s no perfect Housing Target, but it will become clear that the various current and potential future ways of calculating Need are all inflated; no more than an agenda disguised as science.
Note: The local figures used in this article are all 20-year figures. The national figures however are annual.
Before going any further, it’s worth re-iterating that a Local Authority like Basildon, which is fortunate enough to have Green Belt designation for its countryside, does not have to meet its “Local Housing Need” if that means building on the Green Belt.
After all what’s the point of Green Belt designation if you have to build on it? Instead, Councils can set a Housing Target lower than Need, as Basildon eventually chose to do. Though of course they still chose to sacrifice very large areas of Green Belt, especially around Billericay.
It's only fair to the Council to concede that protecting all our Green Belt, while cut and dried in theory (the rules as laid out in black and white, and as proclaimed by MPs), it is more difficult in practice, for a variety of reasons.
There’s no perfect Housing Target, but it will become clear that the various current and potential future ways of calculating Need are all inflated; no more than an agenda disguised as science.
Note: The local figures used in this article are all 20-year figures. The national figures however are annual.
1. Natural Change
Basildon’s local requirement (Natural Change) for housing, focussing on births and deaths and other trends, but not catering for migration from London and elsewhere, is around 9,600 over 20 years, much higher than that of our neighbours. That figure is a few years old and more recent data suggest a lower figure, we now estimate 6,000.
We could probably meet both of these figures without using Green Belt, but the rules are that Need figures must take into account migration, which around London typically consists of high in-migration from the capital, in contrast to some areas, of the north for instance, where out-migration is often the case.
We could probably meet both of these figures without using Green Belt, but the rules are that Need figures must take into account migration, which around London typically consists of high in-migration from the capital, in contrast to some areas, of the north for instance, where out-migration is often the case.
2. Local Plan 'Need'
When BAG started in 2014, one of the first things we wanted to understand was the Need figures that were threatening our Green Belt. We asked Basildon planners how they could be sure their figures were right; their answer was “Because we use the same consultants as everyone else”.
The south Essex Councils paid building industry consultants Turley to determine their Housing Need figures.
The next we hear of Turley is when they are being paid by developers Taylor Wimpey to browbeat Basildon Council into pushing the ‘Relief Road’ through Frith Wood so that Taylor Wimpey could build 300 more homes on their Tye Common Road site.
Taylor Wimpey told Basildon it must do this in order to meet Need, a figure that they themselves concocted. Some chutzpah!
The south Essex Councils paid building industry consultants Turley to determine their Housing Need figures.
The next we hear of Turley is when they are being paid by developers Taylor Wimpey to browbeat Basildon Council into pushing the ‘Relief Road’ through Frith Wood so that Taylor Wimpey could build 300 more homes on their Tye Common Road site.
Taylor Wimpey told Basildon it must do this in order to meet Need, a figure that they themselves concocted. Some chutzpah!
2.1 Past Migration - the Starting Point
As described, local requirements (natural change) are not, unfortunately, a permissible basis for Need figures. Migration must be factored in, meaning that the more an area has grown in the recent past, the more it is expected to continue to grow.
There are many ways to measure this, but the official ‘Starting Point’ for this is the Office of National Statistics (ONS) projections for each area. These are regularly updated with the latest data and assumptions and can be very volatile – if Basildon build a lot of houses over a year or more, for instance the year Trafford House in Basildon was converted, then lots of people move into the Borough and future Need shoots up.
As an aside, consider the highly controversial high-rise developments the Council is promoting in Basildon Town Centre (and it’s not our place to comment too much on this). Hundreds, even thousands of new homes will be quickly delivered to help meet the contrived Need figures, yet after a period of time the in-migration caused will feed through, causing a steep rise in the next Starting Point calculation. Only focussed and determined political leadership can resist this rigged system.
The Starting Point at the time the Local Plan (2014 based figures) was the highest we have ever seen at 15,400. Previous versions were lower and more recent versions have been much lower; the most recent (2018) version puts the Starting Point at 8,600.
We’ll come back to this Starting Point again, but it is also worth noting that the local authorities separately commissioned a range of more locally relevant Migration based projections which could have been considered – these included more locally accurate assumptions, and were consistently lower than the ONS Starting Point.
But Turley are building industry consultants, so rather than adapt their figure downwards, they adapting them the other way with a series of brass-necked uplifts.
As described, local requirements (natural change) are not, unfortunately, a permissible basis for Need figures. Migration must be factored in, meaning that the more an area has grown in the recent past, the more it is expected to continue to grow.
There are many ways to measure this, but the official ‘Starting Point’ for this is the Office of National Statistics (ONS) projections for each area. These are regularly updated with the latest data and assumptions and can be very volatile – if Basildon build a lot of houses over a year or more, for instance the year Trafford House in Basildon was converted, then lots of people move into the Borough and future Need shoots up.
As an aside, consider the highly controversial high-rise developments the Council is promoting in Basildon Town Centre (and it’s not our place to comment too much on this). Hundreds, even thousands of new homes will be quickly delivered to help meet the contrived Need figures, yet after a period of time the in-migration caused will feed through, causing a steep rise in the next Starting Point calculation. Only focussed and determined political leadership can resist this rigged system.
The Starting Point at the time the Local Plan (2014 based figures) was the highest we have ever seen at 15,400. Previous versions were lower and more recent versions have been much lower; the most recent (2018) version puts the Starting Point at 8,600.
We’ll come back to this Starting Point again, but it is also worth noting that the local authorities separately commissioned a range of more locally relevant Migration based projections which could have been considered – these included more locally accurate assumptions, and were consistently lower than the ONS Starting Point.
But Turley are building industry consultants, so rather than adapt their figure downwards, they adapting them the other way with a series of brass-necked uplifts.
2.2 Uplifts
Turley actually developed two separate but similar Need figures, by deploying varying combinations of uplifts to the highest ever Starting Point.
All these uplifts, and arguably the Starting Point, all amount to accelerated out-migration from London.
An uplift was applied on the basis that affordability would be improved by building extra homes. That assumes that the new homes that the developers wish to build would be affordable to local young people. It ignores that a reduced average household size to address this issue is already built into the Starting Point.
If we genuinely wish to address affordability – and Turley and the developers don’t – we would be building high-quality Council Homes for local people.
The Borough’s “Latent Labour Force” is ignored in these calculations – Turley considers them unavailable to fill the jobs that might come. These forgotten people include:
Note: These workforce figures were from around 2012, the figures may be higher or lower now.
The mechanism by which bringing in extra people might attract new businesses to come, is principally that excess labour suppresses wages and so increases profit.
By reducing wages, this approach reduces the affordability of housing, an aim at odds with the stated aims of some of the other uplifts applied.
Turley actually developed two separate but similar Need figures, by deploying varying combinations of uplifts to the highest ever Starting Point.
- Accelerated out-migration from London
All these uplifts, and arguably the Starting Point, all amount to accelerated out-migration from London.
- Headship: Uplift to address growth in Household size
An uplift was applied on the basis that affordability would be improved by building extra homes. That assumes that the new homes that the developers wish to build would be affordable to local young people. It ignores that a reduced average household size to address this issue is already built into the Starting Point.
- Affordability
If we genuinely wish to address affordability – and Turley and the developers don’t – we would be building high-quality Council Homes for local people.
- Employment
The Borough’s “Latent Labour Force” is ignored in these calculations – Turley considers them unavailable to fill the jobs that might come. These forgotten people include:
- 8,000 unemployed
- 18,000 part-time workers, many of whom would like full-time work
- 30,000 economically inactive (pensioners, students, housewives and house-husbands etc) many of whom would like to work part or full time.
- 50,000 people who commute out of the borough and might prefer to work closer to home.
Note: These workforce figures were from around 2012, the figures may be higher or lower now.
The mechanism by which bringing in extra people might attract new businesses to come, is principally that excess labour suppresses wages and so increases profit.
By reducing wages, this approach reduces the affordability of housing, an aim at odds with the stated aims of some of the other uplifts applied.
- Another cheeky ‘Headship’ uplift
3. First Standard Methodology
In BAG’s submission to the Planning Inspector during the Regulation 19 Public Consultation at the end of 2019, we made a detailed but measured criticism of the Turley Need figure, while developers argued it should be higher.
One problem though was that the government introduced a new Standard Methodology soon after Basildon’s Plan was submitted. Whereas Councils previously developed their own Needs figures, based on broad guidelines, and usually using consultants like Turley, in future a Standard method was to be applied.
The method intended to address affordability by channelling growth to the most expensive areas. This was much criticised in parliament and elsewhere for accelerating growth in overheated southern areas, like London’s Green Belt, and reducing it in places like the ‘Northern powerhouse’, an area the government was promoting for economic and housing growth.
One problem though was that the government introduced a new Standard Methodology soon after Basildon’s Plan was submitted. Whereas Councils previously developed their own Needs figures, based on broad guidelines, and usually using consultants like Turley, in future a Standard method was to be applied.
The method intended to address affordability by channelling growth to the most expensive areas. This was much criticised in parliament and elsewhere for accelerating growth in overheated southern areas, like London’s Green Belt, and reducing it in places like the ‘Northern powerhouse’, an area the government was promoting for economic and housing growth.
In Basildon, the new Standard method took the highest ever Starting Point (actually a slight variant of the Starting Point) and applied a 40% uplift, the algorithm would have sent that higher but the uplift under that system was capped at 40%.
The new Need figure would be 20,800 as compared to the 19,500 in the Local Plan.
There was no indication of how much the new approach was expected to reduce house prices, if at all.
The new Need figure would be 20,800 as compared to the 19,500 in the Local Plan.
There was no indication of how much the new approach was expected to reduce house prices, if at all.
4. National Projections and Government Policy
4.1 Updated National Projections
The unusually high Starting Point is the root of many of our challenges. The figure of 15,400, significantly higher than previous versions of the figure, was part of the 2014 national projections which perceived a need for 337,000 houses to be built per year, nationally.
The 2016 projections predicted a much lower requirement for the country with a Starting Point for places like Basildon, however the government instructed Councils to ignore the more up to date figures. They thought the reduction in figures might be a blip, but they were wrong.
The 2018 figures were lower again, indicating the country needed 164,000 houses per year and that Basildon’s Starting Point should be around 8,600 (compared to the 15,400 previously).
The unusually high Starting Point is the root of many of our challenges. The figure of 15,400, significantly higher than previous versions of the figure, was part of the 2014 national projections which perceived a need for 337,000 houses to be built per year, nationally.
The 2016 projections predicted a much lower requirement for the country with a Starting Point for places like Basildon, however the government instructed Councils to ignore the more up to date figures. They thought the reduction in figures might be a blip, but they were wrong.
The 2018 figures were lower again, indicating the country needed 164,000 houses per year and that Basildon’s Starting Point should be around 8,600 (compared to the 15,400 previously).
4.2 Government Policy
The government needed to think about factors such as the national annual target, how this growth should be distributed and other factors such as the crucial question of the type of housing (which we won’t discuss in detail here).
So what commitments and signals had they already given the electorate?
The government needed to think about factors such as the national annual target, how this growth should be distributed and other factors such as the crucial question of the type of housing (which we won’t discuss in detail here).
So what commitments and signals had they already given the electorate?
- The Conservative party manifesto committed to delivering 300,000 houses per year, yet at the same time committed to delivering a million over five years – 200,000 per year. The other parties also proposed very high levels of housebuilding.
- They promoted a “levelling up” agenda for investment and growth in struggling regions, an idea that helped them smash the ”Red Wall”, and achieve their large majority in parliament.
- They are committed to growth in the Northern Powerhouse and are setting up controversial development corporations in the midlands - the Oxford-Cambridge arc.
- They are developing the expensive and unpopular HS2 link to create extra rail capacity in the midlands and north.
- They are considering setting up de-regulated ‘Freeports’ to promote growth in disadvantaged regions.
- Continuing commitment (or continued lip-service) to the idea of preserving the Green Belts around London and elsewhere.
- The May and Johnson leaderships have signalled that they wish to turn their back on unpopular Thatcherite free market fundamentalism.
5. New Standard Methodology
The government had a choice to make with regard to which projections to use, would they use the old statistics that gave a 337,000 annual national requirement or the most up to date 164,000. They kind of went for both.
They couldn’t ignore the more moderate and up to date figures, but they kept to the 337,000 overall target – more than double the national level of building suggested by the latest figures!
The more up to date figures would be used to give lower new local Starting Points (which were part of a national figure of 164k per year) for places like Basildon, but would be warped by a new algorithm designed to meet the old national target of 337,000.
This is far more than developers are willing to build as their costs would go up and there would probably also be some impact on prices. If the government wants very high-volume building, they probably need to get the public sector, local Councils, building homes for their people. The sky-high 337,000 target suits developers as they pressurise local authorities into designating a lot more greenfield sites for development, sites they will then prioritise at the expense of more sustainable but less profitable brownfield sites which they will landbank instead.
Be that as it may, the uplift applied to the new local Starting Points would surely need to reflect government policy to the regional distribution of growth.
Unfortunately, the government (politicians and civil servants) brought no ideas of their own to this aspect of the White Paper, but let the building industry design it for them.
“The Government has welcomed contributions from experts, including Savills and Lichfields, on helpful proposals on how to adjust the methodology…”
From the Ministry of Housing, Communities and Local Government consultation document.
The uplift formula used suits the building industry’s agenda by channelling growth to the most expensive areas, rather than areas compatible with the governments stated objectives of boosting the regions.
They couldn’t ignore the more moderate and up to date figures, but they kept to the 337,000 overall target – more than double the national level of building suggested by the latest figures!
The more up to date figures would be used to give lower new local Starting Points (which were part of a national figure of 164k per year) for places like Basildon, but would be warped by a new algorithm designed to meet the old national target of 337,000.
This is far more than developers are willing to build as their costs would go up and there would probably also be some impact on prices. If the government wants very high-volume building, they probably need to get the public sector, local Councils, building homes for their people. The sky-high 337,000 target suits developers as they pressurise local authorities into designating a lot more greenfield sites for development, sites they will then prioritise at the expense of more sustainable but less profitable brownfield sites which they will landbank instead.
Be that as it may, the uplift applied to the new local Starting Points would surely need to reflect government policy to the regional distribution of growth.
Unfortunately, the government (politicians and civil servants) brought no ideas of their own to this aspect of the White Paper, but let the building industry design it for them.
“The Government has welcomed contributions from experts, including Savills and Lichfields, on helpful proposals on how to adjust the methodology…”
From the Ministry of Housing, Communities and Local Government consultation document.
The uplift formula used suits the building industry’s agenda by channelling growth to the most expensive areas, rather than areas compatible with the governments stated objectives of boosting the regions.
Figure 1 - We don't understand it either!
Unlike the first Standard Method, this uplift is uncapped, so that if fulfils the 337,000 annual national target, allowing the developers to be compensated for the fall in local Starting Points.
6. Adjustment for Green Belt
As described, at the current time, Need – however concocted, is not binding, it does not have to be met by those Councils lucky enough to have their countryside designated as Green Belt.
The government now proposes binding targets. The proposals have not been published yet, but the idea is that there is some sort of discount to the new Need figure to account for constraints like Green Belt, National Parks etc.
The government now proposes binding targets. The proposals have not been published yet, but the idea is that there is some sort of discount to the new Need figure to account for constraints like Green Belt, National Parks etc.
So, having blown their regional planning strategies out of the water by channelling growth to places like London’s Green Belt, they now seek to fudge it by channelling some of it away again.
7. Impact on Basildon Borough
Our understanding is that the absurd new approach would see Need calculations go up across South Essex, but not it seems in Basildon.
Our Starting Point (Local requirements plus catering for continued in-migration at recent levels) is 8,600 and the uplift under the capped Standard Methodology would take it to 12,000.
But the new uncapped New Standard Method would nearly double the Starting Point, taking it up to 16,400, over twenty years.
Our Starting Point (Local requirements plus catering for continued in-migration at recent levels) is 8,600 and the uplift under the capped Standard Methodology would take it to 12,000.
But the new uncapped New Standard Method would nearly double the Starting Point, taking it up to 16,400, over twenty years.
Figure 2 - several factors make up the number
The new Need figure is lower than the 19,500 in the Local Plan and 20,800 in the First Standard Methodology but it would only take a small change to the inputs, assumption and variables of the algorithm in order to push that much higher.
Conclusion
The government is proposing a national housing target of 337,000 per year, more than twice the level that the latest figures suggest is needed. This is more than developers want to build, so they will prioritise less sustainable but more profitable greenfield sites over brownfield and landbank the rest.
To meet this inflated national target, they are proposing all sorts of controversial deregulation and relying on an algorithm that channels the majority of the new housing to the most expensive areas, where developers will make most money, while credulously claiming that this will improve affordability.
Really? If so give us a target we can judge you by, so we can weigh the harm you are causing against the improvement in affordability you predict. Will you reduce prices by 50%, 20%, 5% or, as seems more likely, not at all.
To meet this inflated national target, they are proposing all sorts of controversial deregulation and relying on an algorithm that channels the majority of the new housing to the most expensive areas, where developers will make most money, while credulously claiming that this will improve affordability.
Really? If so give us a target we can judge you by, so we can weigh the harm you are causing against the improvement in affordability you predict. Will you reduce prices by 50%, 20%, 5% or, as seems more likely, not at all.
The adoption of this one-size fits all Need algorithm, proposed by the building industry to suit their own purposes, looks set to undo the governments regional development agenda.
Growth should be channelled to economically and environmentally sustainable areas, areas that have infrastructure capacity, or to where such capacity can be sustainably created. London’s Green Belt, certainly South Essex, is not such a place. Please take a look at Commuter Infrastructure - Road and Rail
The economic development of the country will be warped by the stated aim of improving affordability, but it will at best slow the rise in prices; a rise fuelled by high interest rates, population pressures, a cartel of developers dominating the market and a range of other economic factors.
The affordability of housing is not best addressed, as developers claim, by building in expensive areas; nor by building the large detached homes they prefer, but by delivering the right type of houses, for instance by the government making it easier for Local Authorities to build genuinely affordable Council Homes for local people.
The government is hoping to build at double the rate the country needs and without giving any weight to strategic or regional planning. Instead they have effectively devolved the responsibility for the regional planning to an algorithm knocked up (on MS Excel?!) by building industry consultants trying their luck.
The contrived Need figures for our borough range from 16-21,000 and could easily go higher, but local need is far lower, around 6,000 and that could be easily met without Green Belt or other unpopular developments – if such a figure were permitted.
Projections and algorithms are never neutral, rarely objective or scientific, they are always designed to fit the desired answer. As a BAG activist, designing an algorithm to predict demand for a public sector service was told - “Just tell them what they want to hear”.
Growth should be channelled to economically and environmentally sustainable areas, areas that have infrastructure capacity, or to where such capacity can be sustainably created. London’s Green Belt, certainly South Essex, is not such a place. Please take a look at Commuter Infrastructure - Road and Rail
The economic development of the country will be warped by the stated aim of improving affordability, but it will at best slow the rise in prices; a rise fuelled by high interest rates, population pressures, a cartel of developers dominating the market and a range of other economic factors.
The affordability of housing is not best addressed, as developers claim, by building in expensive areas; nor by building the large detached homes they prefer, but by delivering the right type of houses, for instance by the government making it easier for Local Authorities to build genuinely affordable Council Homes for local people.
The government is hoping to build at double the rate the country needs and without giving any weight to strategic or regional planning. Instead they have effectively devolved the responsibility for the regional planning to an algorithm knocked up (on MS Excel?!) by building industry consultants trying their luck.
The contrived Need figures for our borough range from 16-21,000 and could easily go higher, but local need is far lower, around 6,000 and that could be easily met without Green Belt or other unpopular developments – if such a figure were permitted.
Projections and algorithms are never neutral, rarely objective or scientific, they are always designed to fit the desired answer. As a BAG activist, designing an algorithm to predict demand for a public sector service was told - “Just tell them what they want to hear”.
