Reforms to Five-Year Housing Land Supply: A Recipe for Fewer Homes?

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Reforms to Five-Year Housing Land Supply: A Recipe for Fewer Homes?

Reforms to Five-Year Housing Land Supply: A Recipe for Fewer Homes?

Harry Bennett 08 Dec 2022
Earlier this year, Government signalled its intention to remove the requirement to maintain a ‘Five Year Land Supply’ (‘5YHLS’) where an LPAs plan is up-to-date. My previous blog looked at the implications of this change (see here).
Now the Government want to go further as detailed in a Ministerial Statement. Focusing on 5YHLS, the four changes proposed are:
  1. The obligation to maintain a rolling 5YHLS will end for LPAs with up-to-date plans (i.e. implementing the previous proposal);

  2. There is to be a consultation on removing the 20% buffer applied to the five-year requirement;
  3. There will be transitional arrangements for certain LPAs whereby they only need to demonstrate a four-year supply instead of a five-year supply; and
  4. The protections afforded to Neighbourhood Plans (Para 14a of the National Planning Policy Framework (NPPFF)) will be extended from two to five years.
The wording of the Ministerial Statement is not precise, instead it sets out a direction of future travel despite it being a material consideration now. We will therefore need to wait until a revised NPPF is published for consultation and, in the meantime, observe how it is considered by Inspectors/LPAs.
Notwithstanding, the overall direction of travel could clearly result in fundamental changes to how 5YHLS works in combination with how plan-making is conducted. The Government has given into internal political pressure, putting us on a policy path that may result in fewer homes being planned for and thus built.
Trying to read between the lines, I have a number of questions for Government – that must be clarified – and wider observations:
The four-year supply: part of a get out of jail free card for tough decisions?
The four-year supply transitional arrangement (i.e. reducing the requirement from five to four years) is one part of some much wider plan-making changes. This is how the proposal appears to fit in:
  • LPAs will likely have greater scope to take account of certain factors to reduce their housing requirement. The factors identified in the Statement are broad and unprecise, but include Green Belt, National Parks, the ‘character of an area’ (hugely subjective but is set to include rurality and density) and heritage assets (seemingly ubiquitous in many areas).

  • LPAs with such constraints that are “advanced” in plan making (Regulation 19 stage? Submitted? At examination?) will be able to revise their advanced plans, plans which presumably began to tackle some of the key housing issues, such as Green Belt release. Through this process they could redefine the amount of land their plans release, potentially releasing less land commensurate to a lower housing requirement. This has much broader implications for the delivery of housing in constrained areas with poor affordability.
  • LPAs undertaking this process would have a period of two-years to revise their plans, during which time they will only need to demonstrate four years’ worth of supply, not five.
This means that areas with the most pressure to deliver homes combined with highest levels of constraints will have greater scope to reduce the number of homes they need to plan for . They will also not be required to maintain higher levels of house building; foreshadowing (prejudging?) a reduced future local housing requirement.
Focusing on the 5YHLS issues, who determines which LPAs benefit from these transitional arrangements due to local circumstances and an advanced plan? Is it the LPAs themselves? If so, on what basis is it considered reasonable that the given LPA can revaluate its future local plan to engage the transitional arrangements?
There are many unanswered questions with this proposal and how the policy is written will be key.
Will LPAs with an up-to-date plan still need to calculate what their developable land supply is?
It is stated that the Government will end the obligation to “maintain” a rolling 5YHLS where the plans are up-to-date. The word “maintain” is interesting (which while consistent with the previous policy paper is something I didn’t previously consider). It does not say that the requirement to ‘monitor’ or ‘update annually’ a 5YHLS will be dropped; simply that it will not need to be maintained. Of course, the question of 5YHLS it is not only whether it exists but also the shortfall of supply is also material.
Are there any exceptions to a plan being up-to-date and the tilted balance being engaged via a lack of 5YHLS?
The Ministerial Statement says:
“Therefore for authorities with a local plan, or where authorities are benefitting from transitional arrangements, … the ‘tilted balance’ will typically not apply in relation to issues affecting land supply.”
Typically” acknowledges that there may be atypical situations where the ‘tilted balance’ could be engaged via a lack of 5YHLS even where a plan is up-to-date. For example, where the Council both fails the HDT by more than 75% and doesn’t have a 5YHLS? Albeit, later in the statement its noted:
“Places with existing plans will benefit from the changes above, as they will be free of five-year land supply obligations provided that the plan is up to date.”
The words “free of” here does not suggest exceptions as the word “typical” does earlier in the statement, but this could simply be the result of a rapidly emerging policy, the details of which are not yet clear.
Removing the 20% buffer reduces the harms of failing to deliver homes
At present, the 20% buffer is engaged where an LPA has recorded an HDT measurement below 85%; requiring said LPA to deliver more homes in the future to make up for its previous shortfalls. The proposal is for this 20% buffer to be removed (pending the outcome of a consultation).
If the 20% buffer is removed, it will result in a greater number of LPAs being able to demonstrate a 5YHLS and thus less ‘speculative’ development will come forward. There would also be less direct mechanism to increase future supply to account for past shortfalls in the 5YHLS calculation.
If the buffer is eventually retained, then in combination with the above changes, the 20% buffer would only apply to LPAs that both do not have an up-to-date plan and are not delivering sufficient numbers of homes. The implication being that fewer authorities would still have the tilted balance engaged or have any shortfalls substantially reduced.
Either way, areas failing to deliver enough homes are the precise locations where more homes are needed; which the 20% buffer helps boost.
Overall, these changes seek to water down the 5YHLS test further than earlier Governments originally planned. It is currently a policy which results in more homes being built. Albeit these homes are on developments seen as ‘speculative’; without noting the fact that they were only ‘speculative’ because of poor and slow plan-making.
If these changes to 5YHLS were brought in ahead of any plan-making reforms, they will cause fundamental issues in bringing forward housing supply in the places that need it most.
In combination with the wider changes proposed, if adopted as one package, we may well see both more plan making and more constrained LPAs being able to demonstrate a 5YHLS, but conversely less homes built. This is because:
  • Constrained LPAs may have greater scope to supress housing requirements; reducing the perceived political pain of advancing a plan. Once adopted they will be protected from 5YHLS challenge.

  • While these plans are prepared, we are also likely to see less development under Para 11d (NPPF) coming forward because of the transitional arrangements requiring only four, not five, years’ worth of supply to be demonstrated.

  • The result of which will be that despite more plan-making, fewer homes will be planned for and delivered in the areas of most acute need. This will affect overall housing delivery in the absence of an effective mechanism to redistribute unmet needs (which does not appear to be something on the cards).

  • In addition, where plans are out-of-date the removing of the 20% buffer will result in fewer homes coming forward as LPAs are less likely to have a supply below either four or five years’ worth than if the buffer did apply.

We will be keeping an eye on the publication of a revised NPPF and PPG for consultation. If you would like advice on the potential implications of the changes or want to consider representations then please contact your local Lichfields office.