New housing need measure a step in the right direction, but it will still undercount need in high value locations

15 September 2017

Communities Secretary Sajid Javid has set out proposals to standardise the calculation of housing need, as signalled in February’s White Paper, Fixing our broken housing market. 

It centres on replacing the existing system for calculating need, which he described as creating an ‘opaque mishmash’ of different figures, with a standardised mechanism. The proposed approach starts with the ONS household growth projections, allowing no room for local planning authorities to use their own migration assumptions – previously a key point of contention. In order to prioritise housing delivery in the least affordable areas, an uplift based on house price to income ratio is then applied, but with the maximum increase capped at 40 per cent above existing plan targets.

A more stream-lined approach to the methodology is to be welcomed.  However, analysis by Savills research suggests that the proposed 40 per cent cap reduces the impact of the new method in the areas where an increase in homes is most needed.  The effect is therefore ongoing under-provision of  homes in the most expensive areas, most notably in London.

In its recent paper, ‘Planning to solve the housing crisis’, Savills proposed a very similar methodology, but without the cap, designed to deliver the 300,000 homes needed each year in accordance with the House of Lords Economic Affairs Committee and significantly above the 266,000 homes the DCLG methodology takes us to. 

The tables below contrast the two outcomes, shown by region and by affordability band, based on a measure of lower quartile house price growth to earnings ratio.  Savills anticipates that the DCLG methodology would undercount need in London by almost 31,000 homes, a 30 per cent shortfall.

Considering outcomes based on an affordability measure suggests that the new proposals would undercount need in the 65 least affordable local authorities – where lower quartile house prices equate to at least 11.4 times the average income – by almost 35,000, or 28%.

David Jackson, Savills head of planning says: “The proposed new approach to measuring housing need is definitely a step in the right direction, but it stops short of fully addressing need in London and other high value locations where the 40 per cent cap creates an artificial upper level.”

By region:

 

Savills

DCLG

Difference

as %

North East

5,900

6,700

800

14%

North West

19,600

21,400

1,800

9%

Yorkshire and   The Humber

15,700

16,700

1,000

7%

East Midlands

18,200

19,500

1,300

7%

West Midlands

20,800

20,300

-500

-2%

South West

26,600

27,100

500

2%

East

36,900

34,700

-2,200

-6%

South East

53,800

48,000

-5,800

-11%

London

103,400

72,400

-31,000

-30%

 

By affordability band:

Lower quartile   house

price to   earnings

Savills

DCLG

Difference

as %

Over 11.4

123,900

89,200

-34,600

-28%

9.1 to 11.4

51,400

47,300

-4,100

-8%

7.6 to 9.1

47,900

49,200

1,300

3%

5.9 to 7.6

33,000

35,200

2,200

7%

Under 5.9

44,600

45,800

1,300

3%

         

All figures rounded to nearest 100.

 
 

Key Contacts

Claire Newing

Claire Newing

Director
Press Office

Savills Margaret Street

+44 (0) 20 7016 3898

 

David Jackson

David Jackson

Head of National Planning

Savills Margaret Street

+44 (0) 207 420 6371