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Keeping up the pace: What does the new Standard Method mean for the South West?

Update 16 December 2020:

The launch of the proposed new standard method for local housing need on 6th August 2020 unleashed a media and political storm. An unfortunate cross-over with the problems of A-levels and GCSEs led to it being dubbed the ‘mutant algorithm’.
On 16th December, the Government sought to resolve matters, making a series of announcements across four publications: 
  1. A written Ministerial Statement
  2. Response to the Consultation on Proposed Changes to the Current Planning System
  3. Updates to the Planning Practice Guidance on Local Housing Need to set the new standard method approach
  4. A spreadsheet with the indicative figures from the updated method

What are the headlines and what does it mean? 

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The Government’s White Paper “Planning for the Future” was released last week, which outlined the planning reform proposals for England, aimed at delivering a "significantly simpler, faster and more predictable system”.
Alongside this is a consultation on “Changes to the current Planning System” which aims to continue the simplification of local housing need calculations through revisions to the Standard Method. The new methodology is out for consultation until 1 October 2020.

Doffing the cap to change

The revisions to the standard method very much ‘doffs the cap’ to the current approach to increase housing supply but seeks to better achieve a ‘fair share’ approach by boosting housing numbers in areas with low projections and putting greater emphasis on the uplift for affordability. An approach which is welcomed.
The new standard method now proposes to yield 337,000 homes a year nationally which is higher than the current figure of 270,000 and a step change towards the Government’s 300,000 homes a year ambition. It follows a similar approach to the current method, but with some important changes:
  • The baseline was previously centred solely on household projections. It now uses the higher of the household projections or 5% of stock growth. This helps to “level up” authorities where projections are unduly low and implies a balanced approach where each authority does its bit;

  • The affordability uplift is now designed to “deliver greater overall emphasis on affordability than in the current standard method”. Instead of uplifting solely based on how unaffordable an area currently is, the method now also uplifts based on the change in the ratio over the last 10 years.

What are the implications for the South West?

The total South West housing requirement has increased from 27,379 houses to 36,804, an increase of 34% on the previous Standard Method target. This is just below the national average change of 35% and sits well below the rate of growth for London, which would see a 67% increase. Furthermore, some of the South West’s LPAs would see significant falls in their requirements under the proposed revised Standard Method. Bournemouth, Christchurch and Poole will see a significant fall (-32%) compared to the current methodology; as well as falls in West Devon (-13%), Gloucester (-12%), South Somerset (-11%), Torridge (-1%) and Cheltenham (-1%). Indeed, Bournemouth, Christchurch and Poole would see the second largest absolute reduction of any local authority in the country with a reduction of 852 dwellings per annum (dpa) from the current Standard Method.
Figure 1: Change in housing requirements from current standard method to new standard method
However there are significant increases with Cotswold seeing a 148% increase (722 dpa), South Hams at 117% (414 dpa), Teignbridge at 102% (774 dpa) and Cornwall with a smaller percentage increase at 44% but a larger absolute increase at 1235 dpa. Clearly, the proposed standard method would have major implications across the South West, with a number of authorities facing the prospect of significant changes in their minimum requirements. Under the current method, 53.2% of the national requirement is located in London, the South East and the South West. Under the proposed method this rises to 67.4% and there will therefore be significant pressure for the South West to delivery its share.
Table 1: South West LPA breakdown
The new standard method will have implications for those authorities where Local Plans are still in the relatively early stages of production, or where Plan Reviews are due in the coming 2 or 3 years. This is particularly the case for Mendip, Wiltshire, the West of England authorities and Greater Exeter. The transitional arrangements set out by the Government in its consultation document propose that from the publication date of the revised guidance, authorities which are already at the second stage of the strategic plan consultation process (Regulation 19) are given 6 months to submit their plan to the Planning Inspectorate for examination. Authorities close to publishing their second stage consultation (Regulation 19), are proposed to be given 3 months from the publication date of the revised guidance to publish their Regulation 19 plan and a further 6 months to submit their plan to the Planning Inspectorate.
Table 2 below shows the date at which adopted plans (including housing requirements) become more than 5 years old for each LPA in the region, and the status of any emerging Local Plans.
Table 2: Local Plan Status
In addition to those LPAs which are currently consulting on emerging Local Plans, the effects of the revised standard method could be felt at any future Local Plan reviews undertaken prior to the wider reforms in the White Paper coming into force.
Some authorities will no doubt press on with their plans at pace including Swindon who will be keen to get their plan to Examination given the 42% increase under the proposed new standard method. Whilst Cotswold with its 148% increase, the largest in the South West, has a recently adopted plan which is likely to allow them to bypass the interim standard method, with the next plan likely to be completed under the new planning reforms.
In the West of England, whilst North Somerset is expected to press ahead of the other four authorities, the joint evidence base on housing numbers currently in preparation will inevitably be impacted by the proposed changes and the new Spatial Development Strategy will need to grapple with these issues. There are large potential increases for South Gloucestershire (+80%) and BANES (+88%) which will be a step change for those authorities, especially the latter given the additional development constraints.
The confusion over the Greater Exeter Strategic Plan with East Devon recently withdrawing from the process and Mid Devon not withdrawing but proposing a new form of GESP instead casts major uncertainty about the timescale for their respective new plans and the progress of Exeter’s and Teignbridge’s reviews. The new changes will have a direct impact on three of those authorities with an increase under the proposed new standard method by 74% in East Devon; 74% in Mid Devon; and 102% in Teignbridge.
The revised standard method could prove useful for any developers pursuing 5 year housing land supply cases where the adopted requirement is more than 5 years old. The reduced requirement in South Somerset will result in the opposite effect for 5 year supply analysis and could indicate benefits to pursuing a 5 year supply case quickly in that LPA, before the revised method is enshrined in formal guidance.
As always, there is a wide variety of situations across the region but this also provides plenty of opportunities for further site promotion.
For implications of what the New Standard Method means for other regions, see below perspectives:
London   |   North West   |   Thames Valley   |   West Midlands   |   Yorkshire and The Humber


What the health? The planning system and healthcare service funding
As the ongoing COVID-19 pandemic continues to reshape our daily lives, one thing has also become clear: we need to think more seriously about the links between the built environment and our physical and mental health. To date, this discussion has generally been weighted more towards access to open space and suitably-sized homes with windows, but the issues are more broadly based. Even though the Government’s Planning for the Future White Paper has charted some radical reforms to planning obligations, the current planning obligation framework will continue to be in force for a few more years, and there are some critical issues which will continue to need to be addressed over this interim period.

Planning for health

Pre-pandemic, the revised National Planning Policy Framework (2019) [NPPF] sought to include a stronger emphasis on health and well-being; it states that the planning system should support “strong, vibrant and healthy communities” (Para 8b) and should take account of “local strategies to improve health… for all sections of the community” (Para 92b). But, it also introduced the notion of addressing inadequate ‘services’ (Para 81b). The development industry in large part accepts the need to contribute to providing capital funding for education and health infrastructure, but despite the NPPF’s subtle shift to include services, little consideration had been given to what role, if any, the development industry should play in helping to address healthcare services revenue funding challenges (beyond its contribution via general taxation).
By contrast, the NHS has proverbially left the running blocks. Faced with budget cuts, resource constraints, and need to keep up with an ageing population, one NHS Trust has been seeking s106 funding for acute healthcare services from via planning obligations since 2014.
These initial requests were successively rejected at planning appeals, as the Inspectors considered that such funding requests were not in accordance with Regulation 122 of the Community Infrastructure Levy (CIL) Regulations (2012) and did not relate to the development. However, two appeals, recovered by the Secretary of State [SoS] in 2016, concluded that such requests were material to the consideration of the applications, were acceptable in principle, and were necessary to make the development acceptable in planning terms.[1] The ‘Securing Section 106 and community infrastructure levy funds’ (September 2018) guidance followed this, in which NHS Improvement and Trusts highlighted the capital and revenue opportunities for NHS trusts impacted by local development.[2]

An un-funded funding gap

So how are Trusts impacted by development beyond infrastructure requirements? The key issue for Trusts is the Government’s current funding mechanism. Trusts are commissioned by Clinical Commissioning Groups [CCGs] to provide planned and emergency acute healthcare to the population of areas under the terms of the NHS Standard Contract. However, this contract is an outturn activity volume-based contract which is agreed annually with CCGs and is based on the previous year’s activity. The contract, therefore, does not account for in-year population increases until the next year, and any additional healthcare activities resultant from an increase in the population of an area – which Trusts are legally obliged to undertake – remain unfunded. Simply put, there’s a potential hole in Trust’s budgets arising from population growth in an area, and a greater number of NHS Trusts are now turning their attention to the development industry to plug these ‘funding gaps’ through S106 contributions.
Having dealt with a number of these requests, we can see there are practical concerns about how some NHS Trust’s are seeking s106 contributions. The Regulation 122 Tests requires s106 requests to be “fairly and reasonably related in scale and kind to the development”. In this regard, it is important that Trusts only make requests for the un-costed ‘new persons’ that would likely and reasonably present themselves for treatment because of a proposed development. This is because some of the population of the development will have moved from within the area, and will have already been considered within the service provider’s funding model. At present, there are legitimate questions regarding whether the Trusts’ calculations address this.
In addition, these requests are typically made well into the determination period of planning applications. Indeed, one Trust submitted four s106 requests to developments which had already been determined by a planning committee in Worcester – requests which were subsequently rejected.[3] Consequently, there is little room left for the negotiation of additional s106 monies beyond which has already been agreed or found viable.

A return to marginal viability debates?

Turning to the latter point, and setting aside broader concerns about the Trusts’ calculations, the manner in which Trusts are currently engaging in the planning system is somewhat at odds with the spirit of the NPPF, and more importantly, likely to hinder the Government’s ambition to ‘build, build, build’.
The revised NPPF shifted the consideration of the ‘viability’ of sites from the decision-making stage to the forefront of the planning process – plan-making – and is clear that Local Plans “should set out the contributions expected from development… [and] such policies should not undermine the deliverability of the plan.” (Para 34).  In the context of education contributions, the Planning Practice Guidance [PPG] states that obligations should be set out in the local plan, so that they are subject to examination [4]. The aim of this is to ensure that these obligations are sufficiently certain and can be accurately accounted for in the price paid for land”.4 This is particularly important, as paragraph 57 of the NPPF serves to limit the scope for re-testing the viability of developments post-Local Plan examination. As such, developers are likely to find it more difficult to justify diverging from planning obligations on viability grounds.
However, currently, few authorities have grappled with the revised NPPF through local plan reviews, and few, if any, local plans contain an explicit reference to the need for developments to fund healthcare services, let alone including a standardised approach. It is therefore difficult for the development industry to factor these ‘unknown’ costs into the viability of the development.
Whilst the economic implications of COVID-19 are still crystalising, the viability of sites will invariably be at the forefront of many plan-making and decision-making discussions. This is likely to limit Trusts further, as the viability assumptions of sites will have already been ‘baked-in’, and the economic uncertainty of COVID-19 will invariably impact the viability of some schemes. Moreover, LPAs may have to make tough decisions in the balancing exercise, to ensure that planning obligations align with their area’s particular priorities: fund the NHS? deliver affordable housing in an area where there is already an acute shortfall? Or ensure this brownfield site is brought back in to use?
The Government has been clear that a critical part of our economic recovery plan is to ‘build, build, build’ the homes and infrastructure this country needs. But there is still uncertainty from Councils and the Government as to whether such requests are acceptable. Fareham Borough Council rejected a c.£6m S106 request for the Welborne Garden Village in October 2019[5], and the SoS recently rejected a £1m request in Teignbridge in June 2020. Coupled with eleventh-hour requests, discussions and negotiations between LPAs, applicants and Trusts, there is a risk that such requests will delay the decision-making process for applications which are proposing to deliver housing to meet needs, which also deliver wider economic benefits.
What the above highlights is that, increasingly, LPA officers will have to weigh up the importantance of further S106 requests in the planning balance, and make difficult decisions as to which best align with the LPA’s priorities, and importantly, which can be viably be delivered. Despite opening up planning obligations to the provision of public ‘services’, the Government is seemingly silent on whether planning should cooperate and integrate with service providers. Historically, whilst both NHS Trusts and CCG’s have been consulted in the preparation of local plans, this has largely in respect of the infrastructure-related impacts of planned housing growth. If planning is to play a role in mitigating the impacts of development on service funding – and evidence from the West Midlands indicates that Trusts believe it should – there is a cogent need for them to engage more proactively in the planning system form an earlier stage, or more specifically, the plan-making process.
In the interim, we would urge our developer and housebuilders clients to have a more keen regard to these potential planning obligations when acquiring land and considering site viability, and to discuss this with us.

[1] Appeal References: APP/T3725/A/14/2221613 and APP/T3725/A/14/2229398[2][3][4] PPG ID: 23b-004-20190901[5] Application Reference: P/17/0266/OA