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London, housing supply and the Green Belt – a complex relationship
Without a doubt, the UK housing crisis is most acute in the capital. Not a day goes by without a story on prices, the need for housing, or how to / where to / why to build more homes in London. Most recently, an old, controversial topic was re-introduced – building homes on the Green Belt.

The context for this debate is crucially important - there is no one, single solution. But understanding the context within which the Green Belt debate sits is vital to building homes.

So, here are six key London housing issues to remember.
  1. The Green Belt is a significant area of land around London but there are other constraints on development too.
In outer London boroughs, 28% of land is Green Belt (which is a planning designation designed to prevent towns from expanding, not a landscape or ecological one), reaching as high as 54% in one borough. However, beyond the Green Belt 34% of land is covered by other constraints that national planning policy says may also restrict development, such as Areas of Outstanding Natural Beauty and National Parks.

Figure 1: London, Green Belt and footnote 9 constraints | Source: NLP Analysis

  1. Demand for homes inside London is high but supply is falling well short.
The Mayor’s most recent iteration of his London Plan set out a need for between 49,000 and 62,000 homes per year, but the planning inspector who scrutinised it, said current policies meant London would not be able to meet this need, and set a more realistic annual target of 42,000 homes. In 2015, just 25,000 homes were built, and although output is expected to grow for 2016, it will be below what’s required. If need is not able to be met in the capital it will ‘overspill’ to neighbouring areas.

Figure 2: Housing starts, completions, target and need in London | Source: DCLG; FALP; NLP analysis

  1. London’s housing market influence reaches far beyond its outer boundary.
Because London is a magnet for people wanting to live and work here, household growth continues apace. London’s overspill needs puts pressure on surrounding areas in the commuter belt, but many of these places have their own housing needs which many already struggle to meet, due to Green Belt and other constraints. This raises prospect of the double overspill – pushing housing to locations even further out from London, with longer and more expensive commutes for many.

Figure 3: Proportion of district’s employed residents that commute to London | Source: ONS; NLP analysis

  1. Housing undersupply means London house prices are extremely high.
House prices in London are now almost 50% higher (in nominal terms) than the pre-crash peak – prices in the UK excluding London are only 12% higher.

Figure 4: Nominal house prices since the pre-crash peak | Source: ONS; NLP analysis

  1. Brownfield land isn’t a panacea.
While it is important to consider all types of land for development, brownfield land often has viability and remediation difficulties before houses can be built. It is not always in locations where people are willing to live, and is often currently used to accommodate London’s industries, who would need to be relocated. And, it won’t last forever: in London, even if we only used brownfield land to fully meet the capital’s annual housing need, we would run out completely in six years.

Figure 5: The number of years suitable brownfield land for housing would last if only this land met annual need | Source: NLUD-PDL; NLP analysis

  1. Local plans progress can be slow.
The Government wants local councils to prepare Local Plans to ensure that land is identified for housing to meet needs. But progress is slow. Nationally, just a third of Local Authorities have an up-to-date Local Plan, and for those Green Belt areas surrounding London, the figure is a derisory 15%. The Government has said it expects Councils to produce new Plans by “early 2017” or risk intervention and is considering further reforms. No-one yet knows how this will play out, but until Plans are in place, London and its hinterland will fail to plan effectively for the homes that are needed.

Figure 6: Local plan progress in areas surrounding London | Source: PINS; NLP analysis

No-one yet knows how this will play out, but until plans are in place, London and its hinterland will fail to plan effectively for the homes that are needed.



Getting to Grips with Functional Economic Market Areas
The principle of Functional Economic Market Areas (FEMAs) is of longstanding relevance for spatial and economic planning. However, until recently, it was not always being clearly applied in practice, even under the Regional Strategy regime: most local authorities produced economic evidence based on their local authority boundaries, and made general reference to their neighbouring authorities. However, the Government’s Planning Practice Guidance (PPG) published in 2014 gave FEMAs far more prominence: it states that economic development needs should be assessed in relation to relevant FEMAs - that is, the spatial level at which local economies and markets actually operate (in most cases extending beyond administrative boundaries). In that sense, it is analogous to the role of Housing Market Areas (HMAs) in assessing housing need.

To support our clients to meet this requirement, NLP has developed FEMAplan: a framework for assessing the scope and nature of FEMAs. Having applied this framework for some of the first post-PPG FEMA mapping exercises across the country, it seemed like a good time to reflect on what we have learned, how this has shaped our thinking about the geography of local economies, and what this might mean for local authorities and their partners when it comes to planning for, and delivering, economic growth. Some key observations and reflections are set out below.

Across the guidance (PPG and previous Government notes), a number of key themes and factors are identified as useful approaches or ways of thinking about the economic geography of a local area. These themes shape FEMAplan and are summarised in the Figure below.
When undertaking FEMA analysis, explore the opportunity to collaborate with neighbouring authorities and partners, shaping the scope of analysis together and sharing resources if possible. This approach has been taken in Thames Valley Berkshire where NLP recently supported the Thames Valley Berkshire Local Enterprise Partnership (LEP) and six Berkshire authorities to examine the economic linkages and relationships that exist across the area. This sub-regional partnership approach also worked well in Sheffield and Rotherham, Hertfordshire and Bedfordshire, using the latest data to revisit and re-examine established economic relationships and networks.

Example Commercial Property Market Area Analysis

Be clear from the outset what the purpose of the FEMA analysis is. Is it needed to define the geographical area of analysis for an economic strategy or employment land study, to inform Local Plan policies or Infrastructure Plans? FEMAplan has been used to explore a range of policy issues, from an assessment of the potential scope for new strategic employment sites within the ‘Gatwick Diamond’ to appraising current economic performance and potential across the Greater Brighton and Coastal West Sussex area.

Draw on existing data and analysis as far as possible, with published studies often containing a wealth of intelligence and analysis. When it comes to synthesising this information with new intelligence and data, try and remain open to different ways of thinking about economic geographies and flows of people, goods and capital, particularly where this might deviate somewhat from the ‘status quo’. Our recent work in Berkshire looked beyond the well-recognised concept of an M4 Western Corridor to identify three distinct sub-market areas operating within the Thames Valley (see Figure below), each with their own unique characteristics and profile of occupier demand.

Sub Market Areas in Thames Valley Berkshire

Once a range of factors for mapping FEMAs has been chosen, collating the evidence into a single FEMA boundary can prove challenging; ultimately an element of judgement will be required. One approach could be to consider the ‘degree’ of relationship or overlap with adjoining and nearby authorities across different indicators. In Bracknell Forest, this exercise found that functional linkages with adjoining Windsor & Maidenhead were stronger in commercial property and labour market terms than they were for housing and consumer markets. This evidence will help to determine where cross boundary cooperation will be required on particular strategic planning issues.

Analysing the spatial extent and nature of FEMAs also provides a great opportunity to use powerful GIS, mapping and graphics tools to convey sometimes complex and unfamiliar geographies in a user friendly and digestible format. FEMAplan uses NLP’s market-leading Spatial Analytics skills to capture a broad array of economic information and analysis in a visually appealing and creative way. For example, business sector mapping was used to identify the spatial distribution of business activity and clustering of sector specialisms across the Nottingham Core and Outer Housing Market Area (HMA), as illustrated below. This intelligence was used to help shape a spatial strategy for accommodating business needs across the HMA.
As part of the process of streamlining local plans, recent recommendations made by the Government-appointed Local Plans Expert Group pointed to the potential for government to update national evidence on the definition of HMAs, as well as aiming for coordination between economic and housing planning boundaries to facilitate more effective strategic planning. A sound understanding of economic geography will be key to the outcome of this recommendation being taken up, and we will be watching with interest to see how local planning authorities and their partners apply this evidence and use it to shape their development strategies, and their cross- boundary ‘duty to cooperate’ discussions in the months ahead.

Find out more about FEMAplan and how it can be used to examine functional economic geographies by getting in touch.