Among the changes proposed by Government (much trailed in the media) is a new Standard Method (SM). If adopted, it will provide the kinetic force that drives the boost to housing delivery that the Government is seeking.
The SM for local housing need has a long history (see our chronology
here). Under almost constant review since it was formally introduced in 2018, it has proved very difficult to change; attempts at its
revision (or indeed
abolition) have generated controversy and hit the buffers.
The
current SM is based on a four-step approach for each local authority area (LAA)
[1]:
-
Using the 2014-based household projections, take the 10 year average growth rate (with the current year being the base year);
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Apply an uplift, based on the latest median workplace-based affordability ratio (formula set out in national guidance);
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Apply a cap, where appropriate. Where the strategic policies for housing in the current plan are less than five years old, cap the need (from steps [1] and [2]) at 40% above the current plan requirement. Where more than five years old, cap the need at 40% above whichever is higher of the current plan requirement or household projections; and
-
[For the 20 largest urban areas nationally] – apply a further 35% uplift to step [3].
At the time of writing this generates a national total of around 305.7K net additional homes per annum, of which around 99K is in London. Against this current local need, the aggregate of local housing targets (or requirement figures) in adopted Spatial Development Strategies and Local Plans is 231K; a level around which the supply of extra homes has broadly aligned since 2017
[2].
The proposed new SM adopts a two-step approach for each LAA:
-
Take 0.8% of the current housing stock of the area;
-
Apply an uplift, based on a three-year average of the median workplace-based affordability ratio, with an increase of 15% for every unit above four.
At the time of writing, this generates a national total of around 371.5K net additional homes per annum, of which around 80.7K is in London. Outside the capital, compared to the current SM, 90% of LAAs areas will see an increase in their LHN figure, and 69% will see an increase of over 200 homes per annum.
You can access the specific numbers for each District in England direct from the Government-produced
spreadsheet or via
our interactive map.
Beyond the individual numbers, what can we say about the proposal?
Mandatory but not binding
A lot of political debate about the SM has conflated it with the term ‘housing targets’ and revolved around what adjective should be used to describe it: is it advisory, a starting point, mandatory or binding?
The NPPF proposals suggests the proposed SM would be:
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mandatory in that it should be the basis for establishing need in Local Plans, with no provisions – exceptional or otherwise – for using a different method;
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not binding in that it is not the same as the housing requirement (or target) in the local plan, which is to be set on the basis of the presumption in favour of sustainable development (NPPF para 11 a) and b)). Local Plans may be justified in providing for less housing than needed in their area if there are areas or assets of particular importance that restrict development or if the adverse impacts of meeting need would significantly and demonstrably outweigh the benefits.
The mandatory element and a 0.8% stock-based starting point means a small number of locations (perhaps more remote areas or towns that have experienced de-industrialisation) will see high estimates of need alongside very low (or even negative) levels of household growth. In these locations, providing new housing as a flat percentage of stock may in some instances give rise to housing market displacement (similar to that which afflicted some areas of housing market renewal in the 1990s) or may prove not to be deliverable. Previously, such areas might have cited the NPPF’s provision for ‘exceptional circumstances’ and sought to rely on an alternative needs assessment; now, if they are to conclude that it would be inappropriate to set a housing requirement that meets the SM figure in full (and if there are not nationally-designated protection policies), it will be necessary for them to explain how adverse impacts of planning for those needs in full will significantly and demonstrably outweigh the benefits under the ‘tilted balance’.
A stock-based approach
The Government’s big proposal is to shift from measuring housing need based on demographic projections to one that starts with the current number of homes in an area.
We first explored the potential of this approach in
our review of possible Standard Method reforms in 2020 and elements of it appeared as a 0.5% ‘floor’ in the so-called 'mutant algorithm' of August 2020.
The advantages of a stock-based method advocated by Government might be said to be that it:
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Remains relatively simple, using national and freely-available statistics that are produced consistently for all local areas, are robust and updated regularly;
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Uses inputs that are stable over the medium to long term (including using smoothed averages where appropriate);
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Avoids the circularity and volatility of household projections, whereby:
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Repeated iterations of ONS population and household projections fluctuate based on trends, making it difficult to plan
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Low rates of housebuilding lead to low levels of household growth (by migration or household formation) in an area, which is then perpetuated by trend-based projections
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Addresses the fact that even a big uplift for acute affordability in such an area is unlikely to makes a significant impact if it is applied to a small rate of household growth (a big % uplift to a small number is still a small number).
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Ensures that at least 300,000 homes can realistically be achieved, with this number being at the minimum end of what experts believe is necessary to address affordability and need for affordable homes over the long term;
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Ensures the SM genuinely 'boosts' housing supply, across all parts of the country, as per the original intention of the policy.
In the context that the 'tilted balance’ of the NPPF presumption may be invoked in some cases (where the 'harms' of development are weighed against the benefits of new housing) it will be important – in applying a stock-based method – for it to be clear how the numbers associated with that approach in each area are consistent with securing the benefits that new housing will bring, absent the usual demographic starting point.
Higher than past delivery, current local targets, and the current standard method, in every region[3]
Within the headline national increase, the proposed SM would see boosts in every region (see Figure 1). It is double the current North East’s need figure
[4] and 76% higher than the figure in the North West. The need would be in the order of 20 – 70% higher than recent rates of housing delivery
[5] across all regions except London (where the need figure is well over double). Some individual LAAs will see very marked increases, particularly where the demographic trends in the period 2009-14 (the recessionary period which informed the current SM’s demographic starting point) were very low
[6]. A consistent criticism of the current SM was that it under-cooked housing need in many parts of the midlands and north, where local plans were often already aiming to provide for more homes, often for economic and ‘levelling up’ reasons.
Figure 1 Regional Breakdown of Housing Target and Delivery Data
Source: MHCLG / Lichfields analysis
But if the regional story is interesting, it is the type of planning issues it generates that tells us what kind of challenges the new method will introduce and some indication of how many homes the proposed method – alongside the envisaged changes to the NPPF might generate.
Targets and Constraints
We have correlated the housing target and delivery data with four ‘types’ of LPA area, to explore what this tells us about the impact of the numbers in combination with proposed new NPPF policies:
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Category 1: London (the area covered by the Mayor’s London Plan).
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Category 2: LPAs where their administrative area is mostly built-up and/or constrained with a significant amount of Green Belt. This is in the context that the NPPF proposes to make brownfield development within settlements acceptable in principle and – most significantly - to compel reviews of the Green Belt and for ‘Grey Belt’ to be capable of development in situations where there is no five year land supply or the Housing Delivery Test (HDT) result is below 75%.
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Category 3: LPAs where the administrative area is mostly built up and/or constrained by other national constraints (e.g. national landscapes) for which there is no fundamental change of policy.
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Category 4: LPAs in the rest of England – i.e. areas which are unlikely to have fundamental other national policy constraints.
The housing target and delivery data is cascaded through these four categories by absolute annual numbers (Figure 2) and as a percentage of housing stock (Figure 3).
Figure 2 Housing Target and Delivery Data by LPA Type (Dwellings per annum)
Source: MHCLG / ONS / Lichfields analysis
Figure 3 Housing Target and Delivery Data by LPA Type (Dwellings per annum as % of Housing Stock)
Source: MHCLG / ONS / Lichfields analysis
This analysis shows that:
-
London has been delivering at 38% of the current SM (at circa 38K dpa), below its London Plan target
[7], but its recent delivery (1.0% of current stock) is relatively high compared to other constrained areas. The proposed SM rate is down, from 2.6% in the current method, but at 2.1% is still stretching. One can contemplate that some proposed NPPF changes to policy on Green Belt review might drive higher targets and delivery, but it is untested whether London will meet needs in full – achieving even the current London Plan targets (of 53.2K) by end of the current London Plan target period would be an achievement.
-
LPAs that are predominantly urban and/or constrained by Green Belt have existing local plan targets and recent rates of housing delivery at around 70% of the current SM and a stock growth rate of just 0.7%, reflecting that Green Belt constraints (and the absence of up-to-date local plans) have tended to suppress delivery. The proposed SM represents a 26% uplift compared to the current formula, but in combination with the NPPF proposed change to policy on Green Belt and renewed focus on cross-boundary working, there must be expectation that a far greater proportion of needs will be met. If future plans saw, say, 85% of the higher proposed need effectively planned for (up from 70% of current need now), this would deliver an extra 30-35,000 homes each year at a rate of stock growth of 1.09%.
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The other areas LPAs that are predominantly built up and/or constrained by other national protections currently see the lowest rates of planned growth (0.7% of stock) and represent a relatively small total share (6-8%) of housing need. It is unlikely their rate of housing delivery will change much as a result of the proposed NPPF or revised SM.
-
Across the Rest of England, Local Plan requirements and recent rates of delivery have been above the current SM (at c.115K per annum); they would be stretched by the new proposed SM (at c.148K) but would – if met in full – still be at 1.4% of stock, similar to the rate that the London Plan has been targeting. On its face, that ought to be achievable, and its contribution to total housing need would increase to c.40% from 30% currently (but its share of recent housing delivery has been punching above its weight, at around half).
Will this achieve Government ambitions for 1.5m?
In combination, one can see how the proposed Standard Method, in combination with proposed NPPF revisions (particularly on duty to cooperate and Green Belt review) has the potential to unlock planning constraints to housebuilding in many locations that have so far capped local plan targets, and to stretch delivery in less constrained areas where current targets are largely already met. 300K per annum looks readily achievable based on the policy platform set out, in the context that rates close to 250K have been achieved in the recent past, despite the challenges in London and in the areas where around a third of local housing need in England has been locked up in areas where local plan coverage is lower than average and where Green Belt has constrained development, and where rates of stock growth have been consequentially low.
Over the course of an economic cycle, the level of housing delivery will fluctuate with the market, but overall rates of delivery will be a significant function of the amount of land released by the planning system, which is shaped by the targets that are set via a housing need methodology and the national policies of the NPPF that direct how much need is actively planned for in local plans. The Competition and Markets Authority (CMA)
found that:
“The planning system is exerting a significant downward pressure on the overall number of planning permissions being granted. Over the long-term, the number of permissions being given has been insufficient to support housebuilding at the level required to meet government targets and measures of assessed need.”In December 2020, we
said the current Standard Method was a method that “
with a fair wind, [is]
a recipe for maintaining (just) current national rates of housing delivery [of around 230K]
, but seem unlikely to get England over the 300K hurdle.” In February 2023, we
said that the then proposed changes to the NPPF could lead to a fall to 156K.
The hiatus in plan making in combination with the recent housing market downturn looks set to see rates of house building at 170-190K this coming year (a fact the Secretary of State highlighted in her Parliamentary statement) and recovery will be gradual. Looking ahead, based on our analysis of the four categories above, we can conclude that the new method alongside the NPPF is readily consistent with achieving an annual run rate of the 300,000. Getting to that by the end of the Parliament is eminently realistic but would nevertheless be an achievement with which the Government could be justifiably pleased, given past rates of delivery and its
starting point.
But what about the 1.5m ambition? Even setting aside the practical and market challenges, the new method and policy framework as currently proposed seems unlikely to get there. This is because it is not proposed to be calibrated to achieving an accumulating 300K pa target over five years.
Until Local Plans are in place
[8], housing supply in most areas will be monitored against a target (the SM) that is refreshed each year, with any shortfall from that year wiped clean. This means that the under-delivery against 300K in initial years will not be added to the annual requirement for future years in most places. Therefore planning decisions focused on future delivery will be made based on what is needed to achieve the annual target for five years from that rolling date, not the beginning of the Parliament. Although a worsening affordability due to prior under-delivery in early years might nudge the Standard Method figure up slightly, it is unlikely to be sufficient to 'make good' the annual shortfall of 100-150K that will accumulate in the short term. It might be that some simple adjustments to the NPPF or the PPG to fix the base date of the five year housing land supply calculation in areas without Local Plans is a way of resolving this inconsistency.
Annex: Chronology of the standard method
The introduction of the National Planning Policy Framework (NPPF) in 2012 saw the responsibility of determining local housing needs and housing requirements fall to local planning authorities, having previously been established within Regional Spatial Strategies. Whilst guidance on how housing needs should be assessed was published in 2014, authorities adopted a broad range of assumptions and approaches, and establishing housing need quickly became one of the most time-consuming and costly parts of the plan-making process. The idea for a simple, standardised approach was first mooted in 2016, and has evolved over the last eight years as follows:
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March 2016 – the Local Plan Expert Group reports to Communities and Secretary and to the Minister of Housing and Planning that key issues facing plan makers include authorities struggling with a complex local plan process and housing needs not being met. The LPEG recommended a shorter, simplified, standard methodology for assessing housing need, which amended the planning practice guidance (PPG) to (1) provide greater clarity on the starting point (based on household/population projections), (2) set a clearly defined market signals uplift (based on either 10%, 20% or 30% uplifts, depending on the affordability ratio) and (3) confirm how to factor affordable housing needs (a further 10% increase to housing needs if required). It was suggested that economic-led factors were removed from the housing need assessment process, but plan-making authorities could include these in the housing requirement if appropriate;
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February 2017 – Government publishes the White Paper ‘Fixing our broken housing market’ and responds to LPEG report confirming it will consult on a standard method for assessing housing needs;
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September 2017 – Government publishes ‘Planning for the right homes in the right places’ consultation which includes proposed standard method as follows; (1) baseline, based on household projections over a 10 year period; (2) uplift for affordability [formula-based]; (3) cap, where applicable, depending on current plan age. At the time, Government estimated this would yield 266,000 homes nationally (of which 72,000 in London). Elements of this stemmed from the LPEG recommendations, but there were differences;
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November 2017 – the Autumn Budget confirms that the Government aims to deliver 300,000 homes a year by the mid-2020s;
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July 2018 – a revised NPPF is published which requires local authorities to use the ‘standard method’ for informing strategic policies, unless exceptional circumstances justify an alternative approach. It is introduced into the PPG in September 2018.
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September 2018 – the ONS publishes 2016-based household projections which indicate substantially lower household growth nationally than the previous 2014-based projections (which underpin the standard method). This significantly undermines the ability of the standard method to achieve 300,000 homes per year nationally. The Government almost immediately consults on changes to the standard method to confirm that the 2014-based projections will continue to be the starting point, in order to support the aspiration to deliver 300,000 homes per year. This consultation also suggested that, in the long-term, government would review the formula and establish a new method by the time the next projections were issued;
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August 2020 – Government consults on proposed changes to the standard method which introduces some amendments to the standard method, including amending the baseline (being the higher of either 0.5% of stock or household projections) and amending the affordability uplift (to also take into account 10-year change). This yields 337,000 homes a year nationally. The proposal proved controversial and was dubbed the ‘mutant algorithm’
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December 2020 – The Government backtracks and instead retains the existing method but with a ‘fix’ to incorporate a 35% uplift to the 20 largest urban areas within the standard method which brings the total annual number to around 300,000, but with concerns about whether or not those numbers can be achieved;
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April 2021 – Government formally withdraws the changes consulted on in August 2020, instead stating that it will retain the existing approach and the additional 35% uplift in the 20 largest urban areas;
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December 2023 – a revised NPPF is published which adds that the outcome of the standard method is an ‘advisory starting point’ for establishing a housing requirement, but continues to state that there may be ‘exceptional circumstances’ which justify a different approach but that this alternative should still reflect demographic trends and market signals. It also states that there is no need for the 35% uplift to be redistributed if needs cannot be met in the urban areas.
[1] As explained in the Planning Practice Guidance here at ID2a-001 through to ID2a-016 Revision Date 20 02 2019
[2] See statistics of net additional dwellings here
[3] With the exception of the current Standard Method in London, due to the 35% urban uplift; the proposed figure is 80.7K compared to 98.8K currently, but 73.2K excluding the urban uplift.
[4] Although this is lower than current Local Plan targets in the region.
[5] Based on net housing additions in the three years 2020/21 to 2022/23.
[6] By way of example, Redcar & Cleveland has a current standard method figure of just 45 per annum (just 0.06% of its current stock) which would increase to 642 under the new method; its recent rate of net additions has been 425dpa.
[7] A trend explored by the London Plan Review earlier in 2024. There are some inconsistencies over housing delivery figures in London, as explored by the Review; DLUHC Net additions are used for the purposes of this analysis.
[8] Less than a third of Local Plans are up to date and less than five years since adoption.
