Planning matters

In days gone by[1], the biennial issue of official population and household projections was an inescapable ‘event’ for those involved in planning. Was housing need up or down? Which areas were projected to grow faster? Which local areas might be arguing for a cut in their housing target? Under localism, a whole industry of objectively assessed housing need specialists[2] formed around the dark art of local demography. 

But if housing targets in England are now set with reference to the stock and affordability-based standard method, surely these projections are no longer relevant?

Not so fast. All the signs are that planners do still need to grapple with them when considering housing, employment, retail, infrastructure and other needs.

Although the decoupling of housing targets and household projections is generally welcome,[3] it does raise questions on how one aligns these housing targets with other elements of plan-making that are inherently linked to projections of demographic change. In this blog, we explore these elements and discuss some of the questions that plan-makers will need to address, in light of ONS’s 2022-based Household Projections published today.[4]

Our interactive maps below show these projections at local authority level, including how they compare with past housing delivery, plan requirements and the current standard method. Headlines by potential Spatial Development Strategy (SDS) areas are set out in this blog.

Our key findings in this blog are:

 

Whilst household projections no longer form the starting point for setting housing requirements, it is still interesting to consider how the 2022-based projections compare with earlier iterations, and what this tells us about demographic trends across the country as a whole. 

Projections of population and household growth have been progressively declining over the last decade (Figure 1) owing to both declining population projections and household formation rates.

The 2022-based household projections show a reversal of these trends, largely because the underlying population growth is significantly higher than previously estimated. They represent the highest overall household projections in well over a decade, at 219,000-242,000 additional households per year, broadly the same as past levels of net housing additions. 

 

This increase is largely attributable to the change in underlying population (with more people overall, including more younger people as a result of international migration). But the figures also show that ONS’s latest projections continue to ‘bake-in’ past trends of worsening household formation, particularly amongst younger groups. This has always been a point of contention between the projections and planning, with ONS itself caveating its latest release by saying:

If we applied the earlier – 2018-based - set of household formation rates by age and sex (i.e. the proportion in a given group who form a household) to the 2022-based projection of those living in households, then projected annual growth over the 2025-35 period would be just under 224,000 (Table 1). The actual projected household growth in the 2022-based projections is 218,000; in other words, on a like-for-like basis, the latest projections project a continued deterioration in headship rates such that 6,000 households per year are effectively ‘lost’. When using headship rates from the 2014-based projections – the difference is even greater, at nearly 16,000.

 

The changing demography impacts not only levels of household growth, but also its composition, with consequential implications for planning.

 

For decades the ageing population has been a significant contributor to growth;[5] older people are more likely to occupy homes as couples or singles whereas those of family age are more likely to have adults and children in a single dwelling with consequential implications for the number of homes required for a given size of population (e.g. four single older people who outlived their partner = four homes; a family unit of two adults and two children = one home). In the 2018-based projections 65+ households made up virtually all projected growth (Figure 2). This not only highlighted the importance of planning effectively for the ageing population (both for general housing and specialist housing, as well as infrastructure such as healthcare) but also raised questions on how to effectively plan for demand from other groups (for example to reflect changing working patterns in the post-pandemic world).

The 2022-based projections show older age groups still comprise the majority of growth. But changes to underlying birth rates show the number of families is now projected to decline by nearly 1m over 10 years; previously the decline was only marginal[6]. However, there is a reversal in trends amongst other household types: the number of single person households is projected to increase by nearly 750,000 and the number of adult only (couples, multiple adult households or families with non-dependent children) households increases by nearly 900,000.  The latter groups have a wide range of needs, and housing across a mix of sizes and types will be required. 

 

With the intended move towards larger spatial planning areas (through Spatial Development Strategies[7]) it’s important to consider what these latest projections are showing at larger geographies, both in overall terms and for housing mix.

In line with the national picture, all but one potential SDS area (the West Midlands) has higher projected household growth in the 2022-based projections than in the previous (2018-based) projections, with the most significant increases in growth seen in parts of the north of England, along with Buckinghamshire and Surrey, as shown in Figure 3. 

 

Looking at projected household growth over the next 10 years, there remains a broad north-south pattern, albeit with some outliers. The South West and parts of the Midlands are expected to see the fastest rates of household growth, exceeding 11% over 10 year (1.1% per year), as shown in Figure 4.

With the household projections being lower than the standard method across all the 36 potential SDS areas in England, plan-makers will need to consider how local demographics will respond to the extra supply that is delivered by virtue of the stock-plus-affordability method used to set local housing need.

Depending on the assumptions made, there could be different implications for planning for housing, infrastructure, employment and other needs. For example:

 

Comparing the projections and standard method helps give an idea of the potential types of impact future supply might have, including where supply per the levels in the Standard Method might have the greatest impact on affordability. Of the 36 potential SDS areas in England:

A comparison of context (past completions, standard method and plan requirement) and the new projections by potential SDS area is shown in Table 2 below.

These latest projections are a helpful piece of evidence, being the first set of full household projections produced since the 2021 Census and the first in over five years. They reflect ONS’s most up-to-date picture of projected population growth, which has changed markedly over the last decade. The projections show that the ageing population will remain a key national driver of growth, but also raise important questions about how the planning system supports other groups – particularly single people and couples – in meeting their housing needs. Wider challenges – of addressing decades of housing backlog, improving affordability, allowing flexibility in labour markets and delivering affordable housing– will remain key considerations in considering crucial questions of quantum, location and type of homes and the wider land use questions that arise.