Whether or not an LPA can demonstrate a ‘Five-Year Housing Land Supply’ [5YHLS] in accordance with Paragraph 74 of the NPPF is often a key point of contention in Development Management, particularly at the planning appeal stage. If the supply is below five-years’ worth of housing need (factoring in a buffer where appropriate) then the so-called ‘tilted balance’ in support of sustainable development (NPPF paragraph 11d) is engaged.
Most of the focus surrounding appeal decisions has been on the ‘supply’ side of the calculation. On the requirement side, it’s usually formulaic. But there is one grey area: whether (and how) past oversupply can be accounted for arithmetically in the 5YHLS calculation. This has been used by a handful of LPAs to effectively reduce their five-year requirement. We now have a definitive answer from the High Court, that this area is – and shall remain – grey (unless and until such time as policy is amended, should the SoS be minded to do so).
Background: Undersupply vs Oversupply
When calculating the ‘five-year requirement’ (in accordance with Paragraph 74 of the NPPF, 2021) there needs to be consideration of whether or not there has been a shortfall in supply (PPG ID: 68-022). The shortfall is calculated from the base date of the adopted plan and should be added to the requirements for the next five-years (PPG ID: 68-031)
[1].
But what about so-called ‘oversupply’? Oversupply is argued to occur when a Council delivers more homes than were required by its annual housing policy target since the start of the plan period. The NPPF is silent on oversupply and the PPG says it can be used to offset past shortfalls (ID: 68-032). However, some Councils have inferred that, if policy and guidance require the accounting of shortfalls, then surely it should equally account for oversupply? If it didn’t, wouldn’t this punish LPAs that deliver homes more quickly than was originally anticipated?
Tewksbury Case
This matter was considered at the ‘Land off Ashmead Drive, Gotherington’ Appeal in Tewkesbury Borough (Appeal ref. 3256319 – 12/01/21). If oversupply was taken into account, as the Council argued, then the Borough could demonstrate a 4.85-year housing land supply. If it didn’t (with the Appellant’s amends) it would only be able to demonstrate a 1.84-year supply. In this case it was not, therefore, a matter of whether the tilted balance was engaged, but instead one of the weight that should be attached to the scale of the shortfall itself. The Inspector ultimately sided with the Appellant, calculating the LPA’s five-year housing land supply position without accounting for oversupply.
This decision was challenged in the Courts by the Council on the point of oversupply. The judgement can be read
here and the challenge failed on all grounds. The most important conclusions of the judge (The Honourable Mr Justice Dove) – in my opinion – are found in Paragraph 47 of the Judgement:
- … The claimant contends that this primary submission proceeds on the basis that it is not the claimant's case as to the interpretation of the Framework that paragraph 73 of the Framework prescribes how an oversupply should be taken into account, but rather that whether to take it into account at all cannot be simply a matter of planning judgment but is required by the Framework. Again, similar points arise in relation to the absence from the Framework of any policy text which would justify such an approach. The Framework does not say, nor does the PPG, that oversupply must be taken into account in all circumstances. For the reasons already given it is not for the court to supplement or add to the existing text of the policy. The question of whether or not to take into account past oversupply in the circumstances of the present case is, like the question of how it is to be taken into account, a question of planning judgment which is not addressed by the Framework or the PPG and for which therefore there is no policy. No doubt in at least most cases the question of oversupply will need to be considered in assessing housing needs and requirements. The fact this may be the case does not require the court to provide policy in relation to this issue which the policy maker has chosen not to include.” (my emphasis)
National policy and guidance on this issue is therefore confirmed as silent and it’s all a matter of planning judgement, as to whether or not past oversupply should be accounted for, bearing in mind the particular circumstances of each case and, if so, how to do so (Judgment paras 43, 45 and 47) .
If it is all planning judgment, what might be the relevant factors to take account of?
The key question that arises is what types of factors might be relevant when considering whether or not to account for oversupply and the potential weight to attach to it. As Justice Dove states “the question of oversupply will need to be considered in assessing housing needs and requirements” (47). Exploring this, the following are my initial (and most certainly not definitive!) thoughts of the kind of factors that could be weighed up:
- What was the basis for the Local Plan requirement?
- Is it a minimum requirement for homes, or were efforts made by the Council to go above and beyond to meet growth ambitions?
- If it was calculated via the Standard Method, was the figure capped and is the uncapped figure higher?
- If it was a requirement based on an Objectively Assessed Need calculation, is the standard method now higher or lower than current requirements?
- Was the Local Plan requirement capacity based given constraints?
- Unmet needs?
- Did the LPA have unmet housing needs taken on by a neighbouring authority or did it take on needs for a neighbouring authority?
- Is there a wider level of unmet needs across the Housing Market Area that is going unmet (and potentially not being accounted for in current Local Plans elsewhere?).
- Future Supply
- When looking towards the end of the five-year period and, arguably, a bit beyond, is there a new significant source of supply about to come on stream? To what degree will any short-term need go unmet before this starts delivering?
- Is the shortfall in supply so minor (without oversupply) and is the future supply beyond the five-year period projecting high delivery?
- Is the oversupply so great that it outweighs a shorter-term lack of supply?
- Are the previous levels of delivery that caused the oversupply likely to occur again? Or are they likely to not be achieved in the future?
- Where in the plan-period are we? is the Local Plan being reviewed? Will its requirement need updating? At what stage is that review?
Concluding thoughts: the ‘how’ and ‘weight’
We will eventually see some test appeals, but in the meantime, there is no policy requirement or guidance to account for over-supply. If an argument was made for counting oversupply this would be done in two ways: (1) arithmetically or (2) in terms of weight.
Arithmetically accounting for oversupply within an annual 5YHLS statement throws up a few options (see Paragraph 46 of the judgment). Could this mean simply netting off in the five-year period (akin to how the ‘Sedgefield’ method works)? If so, could this (in an extreme scenario) lead to a negative five-year requirement? Or could it be that it is spread over the remaining plan period trajectory to reduce the annualised requirement (akin to how the ‘Liverpool’ method works)? This will be one to watch.
Notwithstanding, taking account of the relevant factors seems to me to weigh against counting oversupply arithmetically in most cases. The manner in which Paragraph 11(d) operates with Paragraph 74 is binary: either a local planning authority has demonstrated annually that it can identify a sufficient supply of specific deliverable sites for the next five-year period, or it has not. And if not, has this triggers a policy response to remedy that. It would, for example, seem counter-intuitive to reduce the five-year requirement by counting over-supply, so as not to trigger the tilted balance, where housing needs (which may well be above a given requirement) would otherwise go unmet. Netting off oversupply in such circumstances would seem to run against the policy objectives of Paragraph 74.
Taking account of past oversupply therefore appears to lend itself more towards informing a planning judgement on the weight to be attributed to any shortfall identified in the current 5YHLS. This is a factor that will need to be weighed alongside all the other factors at play.
[1] Note: this doesn’t apply where the standard method is the basis of the 5YHLS assessment – ID: 68-031
