Calculating housing need in the planning system (England)

Planning is a devolved matter, and this briefing focuses on England.

The government has set a national housing target of delivering 300,000 new homes in England per year by the mid-2020s. However, the government does not set binding local housing targets for local planning authorities (LPAs).

Instead, LPAs are required to calculate and meet housing need in their local area. The government sets out which steps LPAs must follow in the National Planning Policy Framework (NPPF). In brief, the NPPF states that LPAs must:

• assess local housing need when they are preparing their local plan using the ‘standard method’ provided by the government.
• set out policies in their local plan to meet their assessed local housing need. In doing so, LPAs can consider local land constraints.
• identify suitable sites in their local plan that can deliver at least five years’ worth of housing. This is the ‘five-year housing land supply’.

What is the standard method of calculating local housing need?

The ‘standard method’ of calculating local housing need consists of three main steps. Since 2020, an additional fourth step applies to certain urban LPAs:

1. Baseline figure of the number of new homes needed in an area: Calculate projected household growth for the next 10years using the government’s 2014 household projections for England.
2. Affordability adjustment: Adjust the baseline figure upwards in areas where house prices are more than four times higher than earnings.
3. Cap: Cap the increase at 40% of the baseline or at 40% above the figure set out in the LPA’s local plan if the local plan was adopted or reviewed in the last five years.
4. Urban uplift: For the LPAs whose areas contain the largest proportion of the population of one of England’s 20 largest cities or urban centres, increase the figure by 35% after applying the cap.

In “exceptional circumstances”, LPAs can use an alternative approach to the standard method to assess local housing need. The Planning Inspectorate assesses alternative approaches on a case-by-case basis to ensure they are justified and make realistic assumptions about demographic growth.

Is the figure a binding housing target or requirement?

The figure produced by the standard method is intended to be a starting point to determine the number of homes an LPA should plan for; it is not a binding target or a requirement. LPAs can weigh the figure against local constraints (such as green belt land).

The government updated the NPPF in December 2023 to state that the standard method provides “an advisory starting-point”, not a target.

What is the five-year housing land supply?

In their local plans, LPAs must identify enough sites to deliver at least five years’ worth of housing to meet their local housing need. Until December 2023, all LPAs had to update their supply of sites annually.

In December 2023, the government removed the requirement for LPAs to update their five-year housing land supply annually if they have an up-to-date local plan (which was adopted in the last five years). Other LPAs must still update their supply every year.

How is housing delivery enforced?

The Planning Inspectorate examines whether LPAs have adequately assessed their local housing need and allocated enough sites to meet that need in their local plans. To take effect, every local plan must be approved by the Planning Inspectorate.

The government also carries out an annual assessment of housing delivery in each LPA. If an LPA has delivered less than 75% of its local housing need, the ‘presumption in favour of sustainable development’ will apply. This means an LPA is generally expected to grant planning permission to new developments unless, for example, the site is on protected land.

Views on the standard method and reforms

Opinions differ on the changes that the government made to the NPPF in 2023, which clarified that the standard method is “an advisory starting-point” and removed the requirement for LPAs with an up-to-date local plan to maintain a rolling five-year supply of deliverable land for housing.

Industry groups have expressed concern that these changes could reduce local housing delivery. The Levelling Up, Housing and Communities Select Committee also said that they could make the government’s national housing target of 300,000 new homes per year “impossible to achieve”.

LPAs and groups representing their interests, such as the Local Government Association, welcomed the changes, arguing that they could help curb “speculative development”. The government said the changes will encourage LPAs to prepare local plans and that “having plans in place unlocks land for homes”.

Beyond the recent changes, organisations have also called for other parts of the standard method to be reformed. Industry groups have said the baseline figure for housing need should be based on occupied housing stock, while the Local Government Association argued that it should be based on more recent household projections.

The Levelling Up, Housing and Communities Committee also criticised the 35% urban uplift. It questioned the ability of LPAs to meet the uplift given constraints, such as green belt land and the availability of brownfield sites.