Revisions to the Standard Method – Will it Deliver?

17 Dec 20

Government took some of us by surprise by announcing on 16th December revisions to the standard method, alongside additional funding to unlock brownfield sites. It had been hinting that this wasn’t likely this side of Christmas.

Following the political backlash against the ‘mutant algorithm’ put forward in its consultation proposals in the summer it has rolled back on its ambitions for overhauling the formula with an approach that – at least in outward appearances – promotes additional growth in the largest 20 cities and urban areas across England in support of its ambition to deliver 300,000 homes a year across England.

For the many rural and suburban areas across the country and urban authorities outside of the “top 20” category this means that standard method doesn’t change at all, and the existing approach we’ve been working with since 2018 for these areas continues to hold. These areas make up 84% of local authorities across the country and include the rural and suburban authorities who were most vocal in their opposition to the Government’s proposals in the Summer.

The Government has made a statement that it expects our cities and larger urban authorities to take a greater share of the housing need. Numbers thus change, and are increased, only for the “top 20 cities and urban areas” in England through the introduction of an additional step in the calculation. This fourth step uplifts the previous results by 35%.

This potentially affects 51 individual local authority areas, as the 20 areas include a single London entry covering all 32 boroughs. For these areas, a four stage calculation is now envisaged as shown below.

The Revised Standard Method

At a national level, the formula would deliver 297,600 homes a year based on current data – if every area met its standard method need. But within this, those 51 urban authorities take a greater share. As our analysis below shows, these authorities are collectively expected to deliver an additional 34,000 homes a year. Over 70% of this increase is expected in London with the capital’s need jumping from 69,000 to almost 94,000 homes a year, equating to 31% of the national need.

Increased Housing Need in the Largest Cities/Urban Areas

The list of areas identified is an interesting one and sees notable uplifts in housing need in Manchester, but not for instance Salford or Trafford; in Newcastle, but not Gateshead; and in Wolverhampton, but not in the remainder of the Black Country. Derby makes the list but the larger built-up areas in Teesside or Sunderland do not.

It is clear that a part of Government’s thinking is that with changing retail and working patterns, town and city centres are expected to play an increasing role in delivering homes. There are potentially complex issues of land assembly to grapple with here. It is therefore encouraging to see Government bring forward some additional funding to support brownfield regeneration alongside these changes, although there are questions as to how far the £167 million of funding released might go. But it also looks as if the politics has come into play with the upward adjustments principally affecting labour-controlled authorities which make up 17 of the 20 areas.

We do however need to ask how realistic the scale of increase in housing delivery envisaged in some of our larger urban centres is? Of the list of 20 areas identified, almost half have been grappling with issues of unmet need having been unable to meet lower housing need figures. We would need to see substantial new brownfield land supply identified to meet the previous numbers in some of these areas, let alone the new higher figures.

These reforms may not therefore help to move forward some of the challenging issues around unmet needs which have been a long-running theme around Birmingham, Bristol, Coventry, Leicester or Southampton to name a few. But is interesting to see the wording of the Planning Practice Guidance on this issue – which emphasises that the increased housing numbers are expected to be delivered in the cities and urban centres themselves, rather than in surrounding areas ‘unless it would conflict with national policy and legal obligations.’ The sentiment here is clear, but the reality of how this works in practice less so.

When might we therefore see an impact on the ground? Well this will be influenced by both the policy and market factors. Recasting our town centres will not happen overnight, but there is an opportunity now. But there are also some inherent tensions between the drive to deliver higher numbers in our urban locations on the one hand, the Secretary of State’s ambition for cities to deliver more family homes within the larger urban areas, and where and what the market wants to build. The formula continues to use the 2014 Household Projections which are based on demographic trends between 2009-14, when the housing market and movement out of cities and urban areas was more subdued; and we are now in the midst of a pandemic during which people are questioning where and in what type of homes they want to live.

The regional dimension is also interesting. Reflecting the influence of affordability in the calculation and the application of an additional uplift to the whole of London, the growth rates envisaged in London and the greater South East are at least twice that expected in the North East of North West.

Implied Annual Rates of Growth in Housing Stock by Region

The housing growth envisaged in London is more than double that achieved in recent years. Indeed housing delivery has failed consistently over the last decade to meet a housing target which is less than half of the housing need identified (see below). Based on the incremental improvements we have seen in recent years and the extensive policy requirements in the emerging London Plan, the gulf between need and delivery looks set to continue. In contrast in some more affordable areas in the North and Midlands, there may continue well be a case to test the potential for higher numbers than the standard method recognising the role which housing could play in supporting local investment and economic recovery.

Housing Delivery in London against Targets

With authorities at different stages of the plan-making cycle, as our table above shows, it may take some time for the new figures to feed into the system in the areas affected. On the other hand, for the 260+ authorities which are not affected, there will have been little impact and they can get on with plan-making.

Links to the relevant documents released or revised can be found here:

Written Ministerial Statement: https://questions-statements.parliament.uk/written-statements/detail/2020-12-16/hcws660

Planning Practice Guidance: https://www.gov.uk/guidance/housing-and-economic-development-needs-assessments

Consultation Response and Indicative Figures: https://www.gov.uk/government/consultations/changes-to-the-current-planning-system/outcome/government-response-to-the-local-housing-need-proposals-in-changes-to-the-current-planning-system

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Revisions to the Standard Method – Will it Deliver?

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