Calculating housing need in the planning system (England)

In December 2020, the Government changed how Local Planning Authorities (LPAs) should calculate housing need in their areas. The new approach increases the level of housing need in some urban areas, while remaining the same as before outside of these areas.

The Government has had an ambition to increase the amount of new housing supplied in England for a long time. Its current aim is for housing supply to reach 300,000 new homes per year by the mid-2020s, but supply is not currently at this level.

LPAs are responsible for setting Local Plans, which set planning policies for a local authority area and include an assessment of how much housing is needed.

There have been concerns that in the past, that some LPAs haven’t planned for enough housing in their areas.

The Government’s December 2020 changes to the way that LPAs should assess housing need, as well as those proposed in the white paper Planning for the Future, aim to bring the planned amount of housing in line with its supply ambitions.

The old standard method for assessing housing need

The National Planning Policy Framework (NPPF) sets out how LPAs should create their Local Plans and includes a standard method to assess housing need.

LPAs must follow the standard method when developing their Local Plan, unless ‘exceptional circumstances’ apply. The housing need figure generated by the standard method should be a starting point in the planning process, rather than a housing target. LPAs are also expected to factor in constraints such as how much land is available, when developing Local Plans.

The first version of the standard method was published in an update to the NPPF in July 2018. It had three steps:

1. Assessing projected household growth using 2014-based household projections
2. Adjusting this figure upwards in areas where house prices are higher relative to the earnings of people who work there
3. Capping the level of increase that any one LPA can face, depending on the status of its existing plans.

The Government consulted on changes to the standard method in August 2020. Proposed changes included incorporating more recent household projections and removing the cap that limits the level of increase that LPAs can face.

If the Government’s original proposals had been implemented, the standard method would have increased the level of housing need assessed in many areas, particularly rural ones. However, the proposed changes were not well-received in some quarters – concerns about the geographical distribution of housing need were raised in Parliament and by commentators.

The Government published its response to the consultation in December 2020. In an accompanying ministerial statement, the Housing Secretary, Robert Jenrick, said the Government had “heard clearly” that the building of homes should not be at the expense of “precious green spaces” and could better be done in urban areas.

The consultation response set out the new standard method for assessing housing need, which is now in place.

How is the new standard method different?

The new standard method essentially retains the same steps as the original, but after the first three steps are complete, certain urban areas have their housing need figure increased by 35%.

These urban areas are defined as the London boroughs, plus the local authorities that contain the largest share of the population of the 19 other most populous cities and towns in England (e.g. Birmingham, Manchester, and Liverpool).

While the change in the standard method has been welcomed by some organisations, such as the Royal Town Planning Institute, there has also been a degree of scepticism about whether it will lead to the delivery of 300,000 new homes per year.

Lichfields, a planning consultancy, published analysis that suggested the distribution of need might amount to squeezing “a quart into a pint pot”, as some urban areas may not have the capacity to build to the level of need set out in the formula.

Indicative housing need data for LPAs

The figures show what the housing need could be in each area, if the standard method had been used by all LPAs simultaneously in April 2021. This is a hypothetical – the data doesn’t show the housing need that will be used by these LPAs. In reality, LPAs will carry out the calculation at different times, and the available data and status of Local Plans at the time will affect the outcome of the formula.

Lichfields has shared these figures with the Commons Library and they can be downloaded from the landing page for this briefing (see link, above).

Update note: the Excel file for download was updated in October 2021 to correct erroneous figures in one of the columns. The analysis in this briefing paper is not affected. See the file for details.

Further changes: The Planning White Paper

The Government’s, Planning for the Future white paper, published in August 2020, set out proposals for wider reform of the planning system in England, including changing the way the planning system addresses housing need in the long term.

This included proposals for developing a new standard method for assessing housing requirement, as opposed to housing need.

This new approach would mean MHCLG makes calculations based on housing need, land constraints, and other factors, and passes them on to LPAs to implement.

The Government has not yet announced its response to the consultation on this white paper.