Strategic Land Group warns Standard Method for calculating housing need could be set up to fail

Ahead of the closing date (Thursday 9 November 2018) on the government’s consultation on a new “Standard Method” for calculating housing need, the Strategic Land Group warns it could be set up to fail because it is misses the impact of two crucial influences on the housing market – affordable housing need and economic growth.

The objective of the Standard Method is to address the housing crisis and make house prices more affordable by making it simpler for councils to determine how many homes they need to build. The starting point is the Office for National Statistics forecast for household growth over the next ten years. The Standard Method adjusts the figure to take account of the affordability of housing in each local authority.

The government’s assumption is the maximum level of mortgage finance typically available to home buyers is four-times their salary. Where average house prices are more than four-times average incomes, houses are deemed unaffordable – too few homes are available, and the housing target is increased as a result. The more unaffordable homes become, the greater the increase to the housing target required.

Paul Smith, managing director, the Strategic Land Group said: “At present there is no detail for councils to determine housing need, just a range guiding factors.  This has resulted in lots of different methods being used, producing vastly different results.

“The Standard Method attempts to provide a simple, transparent, easy to understand approach, but the critical question is whether it produces an accurate assessment of housing need; and in my opinion it doesn’t seem to.  It doesn’t take into account affordable housing need and economic growth aspirations.”

“Affordability might be central to the Standard Method, but that is different to the need for affordable housing meaning homes for those who cannot access market housing.

“In some areas, delivering the maximum viable amount of affordable housing from market housing schemes leaves a shortfall against the need for affordable homes. In those circumstances, current planning guidance suggests increasing the housing target to enable the need for affordable housing to be met.

“As it stands, though, the Standard Method does not take into account the need for affordable homes at all. It therefore risks failing to meet affordable housing need.

“Many councils set out plans to deliver better economic growth. They work tirelessly on marketing their town, city, region and its assets to major employers and investors.  Success brings jobs, those jobs need people to fill them, and those people will need new homes. Apart from paying a little lip-service, saying councils ‘may’ plan for more homes the Standard Method does not take economic growth aspirations into account.

“Simplifying the way housing need is calculated will be of huge benefit. Far too much time and effort is currently wasted arguing over the minutiae of housing need models. Yet simple should not be at the expense of missing crucial influences on the housing market.”

This news was published by Place North West.