Planning matters

National and regional housing need figures will soon be published for Wales, based on the Scottish system. On 22 November 2018, the Minister for Housing and Regeneration, Rebecca Evans AM, announced that the Welsh Government will adopt a tool developed by the Scottish Government to calculate national and regional estimates of need and will publish these figures by January 2019.

These official estimates of need, which will be based on a range of different scenarios, will not represent housing targets but will inform the setting of housing requirements within Local Development Plans, forthcoming Strategic Development Plans and the emerging National Development Framework.

The overall housing need estimates will be broken down by tenure in Spring 2019, to include the following sectors:

1. Owner-occupier;
2. Private sector rent;
3. Below market rent; and,
4. Social rent.

In Scotland, planning authorities prepare a Housing Need and Demand Assessment (HNDA) using the standard tool provided by the Scottish Government. This assessment forms the basis for setting Housing Supply Targets and informs housing policy and statutory development plans. The purpose of the Scottish HNDA model is to “provide a robust, shared and agreed evidence-base for housing policy and land use planning”[1]. Where the Scottish Government is satisfied that an HNDA calculation is robust and credible, it will not normally be considered further as part of development plan examinations.

This spreadsheet-based model allows the user to consider a range of different scenarios (“alternative futures”), taking account of official household projections and also estimates of existing unmet need, including homeless households and concealed families. An appropriate tenure mix is then established using assumptions on future income, house prices and rental costs. Each of these factors can be flexed to reflect local circumstances. It is the task of the HNDA Practitioner to choose the most likely scenario or scenarios for their local area.

A housing need figure arising from an HNDA should not be translated automatically into a housing requirement in a statutory development plan. Planners need to consider factors that may affect the pace and scale of housing delivery, such as economic factors, capacity in the construction sector, and the potential interdependency between market and affordable housing at a local level. This could result in a housing target figure that is lower or higher than the estimate in the HNDA.

In the same way, the Welsh Government announcement emphasises that housing targets should take into account policy and practical considerations to reach a view on what is a deliverable level of housing within an area. It appears that this approach may not differ significantly from that in the current Planning Policy Wales (edition 9), which applies the official household projections as a starting point but also requires that local authorities take account of other factors that are relevant to their areas, including the alignment between housing and jobs.

This announcement by the Housing Minister represents a formal recognition of the limitations of the 2014-based household projections as a basis for setting housing requirements in development plans. These projections indicate a level of household growth that is 21% lower for Wales compared to the previous (2011-based) projections between 2014 and 2036[2].

The 2014-based projections also indicate a decline in the working age population in the majority of local authorities in Wales, with an overall reduction of 107,700 people aged 16 to 64 (5.6%) across Wales between 2014 and 2039. This would result in a smaller workforce and potential economic and social difficulties in future. It is therefore important that development plans seek to attract and retain a population size and structure that is able to sustain the local economy.

Both the household projections and the HNDA housing estimates are policy neutral and take no account of economic conditions or regeneration objectives. Many areas within Wales are economically deprived. Experian data indicates that in September 2018, average productivity in Wales was £51,700 per full-time equivalent workforce job, which is 20% lower than the UK average (£64,600). It is therefore vital that the translation of housing estimates to targets within the new system takes account of the need to align housing and economic objectives, such as those in City Deal strategies.

The Minister’s acknowledgement that there is a need to move away from the 2014-based projections represents a positive step. Furthermore, having access to an official estimate of need will provide policy makers with a credible starting point for setting housing requirements, making them less vulnerable to local challenge. However, questions remain as to whether this new system and the publication of explicit housing estimates at the national and regional level will help to deliver the material change in housing delivery that is required in order to support the economy and meet the needs of future generations.

The Housing Minister’s announcement states that the new system, based on the Scottish model, will be applied at the national and regional level to produce official housing estimates for these geographies. It does not indicate that local authorities will be expected to use this model in assessing need for the purposes of LDP preparation, nor is it currently proposed that it will it be available to them. The extent to which the new model will have an impact on local housing requirements is therefore unclear and will to some extent depend upon the roll out of Strategic Development Plans.

Several initial questions are provided below:

1. What evidence will authorities need to provide to support their selection of an appropriate housing estimate from the official range of scenarios upon which to base their housing requirements?
2. How will the national and regional estimates of need be divided between local authority areas where Strategic Development Plans are not in place, and will measures be put in place to ensure these overall levels of need are met?
3. If planning authorities determine that an official estimate of need cannot be met in their area, is this need simply ignored or is there a way to promote its accommodation elsewhere?
4. How will the new system integrate with the existing Local Housing Market Assessment process, which the Housing Minister has stated should continue?
5. Will the new system help to ensure that the translation of housing estimates into targets takes account of the need to align housing and economic objectives in order to boost the Welsh economy?