Sometimes, the issues we must grapple with are so complicated, it is impossible to simplify them.
The standard method story suggests that working out how many homes to build locally is one such issue.
As the proverb says, the road to hell is paved with good intentions and the standard method is replete with good intentions.
Firstly, a desire to speed up plan making, to reduce debate over – shed light on and banish – the ‘dark art’ of full objectively assessed housing need. To keep it simple.
Secondly and with the housing crisis in mind, the objective to establish minimum local housing, in most authorities, above the level of implied by the household projections. A built-in boost to supply.
On its first outing at the end of 2017, the standard method increased the national household projections by about 45,000, thereby establishing national minimum need at 266,000 homes a year.
This new approach to calculating housing need landed at the same time as the government’s Budget 2017 commitment to 300,000 homes a year. The Government’s housing crisis busting target and Mrs May’s mission.
It is fair to say that the development industry view 300,000 as an appropriate minimum national target and that getting there from 266,000 is achievable. Growth deals acknowledged as one way to bridge the gap.
Setting the massive issue of regional distribution aside, when the standard method went live in the summer of 2018, it was as close to ‘so far, so good’ as planning is ever likely to get.
Unfortunately, the wheels came off when the latest household projections were published later that year.
It is a feature of the standard method calculation to use the latest household projections. A hangover from previous guidance and established practice.
The new projections, minted in the autumn of 2018 by ONS who for the first time take on their production, are founded upon lower population projections than their predecessor, and use a new, improved (?) methodology, that results in fewer households per person.
A double whammy that left the latest household projections a long way short, 53,000 households a year short, of the household projections they replaced.
The upshot of switching to new household projections?
Minimum need falls to 210,000 homes a year and bridging the gap to 300,000 stretches credibility to breaking point.
Government, caught on the hop, express dismay and surprise in equal measure. Exceptionally low household and even decline at the heart of growth areas the reason why.
To all intents and purposes, the standard method is immediately put on notice, because it is no longer fit for purpose.
Why is it no longer fit for purpose?
Because 210,000 is less than the number of homes completed last year, and less than the level of household growth forecast by the previous projections.
Shouting to the rooftops that as a target, 210,000 won’t help drive up house building, quite the reverse. And instead of helping solve the housing crisis, would undoubtedly make it worse.
The government proposes a two-stage response to the problem.
First, a short-term fix.
Switching back to the previous household projections as the standard method calculation starting point, keeping all other elements the same, resulting in minimum national need for 269,000 homes a year.
It is hoped that the short-term fix will be confirmed soon, considering NPPF 2018 transitional arrangements that bring standard method fully into play in plan making from 24th January.
Second, a review of the standard method formula and the development of an entirely new method to take its place, to be in place later this year, in time for the next set of household projections.
The standard method will rise again.
We are told that the new method (take 2) will support the aspiration (not target) of supporting a market that delivers 300,000 homes. To that end its principles are:
- providing stability and certainty for local planning authorities and communities;
- ensuring that planning responds not only to movements in projected households but also to price signals; and
- ensuring planning policy supports a housing market that works for everyone.
The principles of the new improved standard method look a lot like the old ones, so we shouldn’t expect big changes.
The first and second principles apply to the current method.
The second principle is the current method, price signals being the affordability ratio, the trigger used by the current standard method to increase local housing need above the household projections.
The implication of the last principle for local housing need is unclear. We will have to see if it opens the possibility of further uplifts, over and above minimum housing need.
It is likely that further uplifts will be necessary, if up to date household projections are to be retained in the new standard method.
Without a change of approach by ONS, their next set of household projections are unlikely to be at (or even close) to the scale of household growth anticipated by the previous household projections.
This will open a sizeable gap between future household projections and 300,000 homes a year, a gap that is likely to be too great to be bridged by ambitious authorities with growth deals.
Moreover, when minimum housing need is the passport to a sound plan, what is the incentive to plan for more?
The latest iteration of GMSF suggests that the carrot simply isn’t juicy enough, or the sting of the stick not sharp enough, to set a housing requirement above minimum need.
Calls to sharpen up disparate and presently ineffective national guidance on housing need, that can be read across NPPF and the new planning practice guidance, should be heeded.
Read as whole, a framework for assessing actual (full) housing need can be divined, including several circumstances that would lead to an assessment of local housing need above the minimum level of need calculated by the standard method.
It is overshadowed and should be brought to the fore so that assessing and meeting actual need, and not simply minimum need, becomes the focus of attention and overall goal.
More fundamentally, if the objective is to enable the delivery of 300,000 homes a year, NPPF2018 will need to be changed to address actual (full) need, necessitating revisions to paragraph 60, and the present emphasis on local plans meeting minimum need.
This would undoubtedly make the process more complicated, but that may be unavoidable, if we are serious about solving the housing crisis.
Development Economics Director