14 Aug 2019
The Welsh Government published its Draft National Development Framework (NDF) for consultation on 7 August 2019, with responses due by 1 November 2019. The emerging NDF is a spatial plan for addressing key national priorities in Wales through the planning system from 2020 to 2040. It will replace the Wales Spatial Plan (2008). Strategic Development Plans (SDPs) and Local Development Plans (LDPs) will be required to be in conformity with the NDF.
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Spatial Distribution of Development
Three National Growth Areas are identified: Cardiff, Newport and the Valleys; Swansea Bay and Llanelli; and Wrexham and Deeside. The draft NDF sets out the requirement for SDPs to come forward in each of these areas, which should shape and be shaped by other regional strategies, including Economic Development Plans, and City and Growth Deals. However, it fails to recognise that these strategies call for aspirational economic growth that cannot be achieved by planning for past development trends.
The emerging strategy rejects the development of new towns on greenfield land in favour of focusing development on existing settlements with good active travel and public transport connectivity.
South East Wales Region
In the South East Wales region, Cardiff is recognised as an internationally competitive city and a core city on the UK stage. However, the document states that Cardiff is nearing capacity due to geographical constraints and so does not support strategic housing growth in the city. Without explicitly stating it the draft framework appears to be diverting strategic growth away from Cardiff, which given its role as the economic driver of the region is a fundamental concern.
Instead, the draft NDF identifies Newport as the focus for strategic housing and economic development, with emphasis placed on brownfield regeneration. However, the high level of existing brownfield allocations together with flood risk and ecological designations around Newport seemingly limits opportunity for significant new allocations. Further analysis is required but Newport potentially suffers from similar limitations to growth to those in Cardiff.
Furthermore, the draft NDF requires that the SDP designate as green belt land to the north of the M4 from the Severn Crossings to North Cardiff. The designation of such a large area, which includes a significant portion of Monmouthshire, would impede growth in an area of high demand strategically located between Newport and Bristol. It is noted that this is expressed as a requirement, yet there does not appear to be an evidence base to support such a major long-term policy decision.
The document recognises the interdependence of the wider region and Cardiff and underlines the need for connectivity. It states that the Metro will generate opportunities on land in close proximity to existing and committed stations.
There is a focus on release of public land, particularly within town and city centres, for development and redevelopment, including for mixed use and affordable housing. The release of additional land is to be welcomed, particularly if land values are adjusted to enable delivery on sites that are currently unviable. However, it is also important that the use of public land is in addition to the identification of other, potentially more appropriate, sites.
(Affordable) Housing Delivery
There is a clear focus on affordable housing but no acknowledgement of the need to increase the supply of market homes. The draft NDF does not set a national housing target but it references the central estimate of need from the 2018-based Estimates of Housing Need: 8,300 additional homes per annum from 2018/19 to 2022/23.
The estimates are based on the 2014-based household projections, which carry forward recession-based trends. They fall far short of actual housing need in Wales and do not reflect committed strategies for economic growth and regeneration. It is therefore vital that the estimates are applied only as a starting point and that housing policy supports prosperity and well-being through alignment with economic aspirations such as those within the Cardiff City Deal.
It is proposed that SDP and LDP affordable housing targets are based on the Welsh Government estimates and local assessments. Nationally, the central estimate states that 47% of all new homes are needed as affordable (3,900 units), with the remaining 53% as market homes (4,400 units). This split takes no account of deliverability and is constrained by the low overall need figure.
It is important to understand that the affordable housing element of the central estimate represents a full assessment of need, which takes into account factors such as anticipated changes in household incomes; this approach also assumes that all existing unmet need will be met within five years. By contrast, the market housing element is simply a projection of past trends and does not consider any wider factors; it therefore does not seek to provide a full assessment of need. It is therefore not appropriate to compare the results of these two elements of the estimates. The Welsh Government has made it clear that the estimates do not constitute housing targets, so the overall level of need has not yet been identified. An indication of tenure split should instead be based upon a full assessment of both affordable and market needs, taking account of demographic, social and economic factors.
A requirement for 47% affordable housing would not be feasible and would instead undermine the ability of the market to drive increased housing delivery. Affordable housing policy should take account of viability and deliverability as a proportion of overall housing requirements and should seek to boost the provision of affordable homes through increasing overall supply. This would have the added benefit of improving affordability of open market housing.
The draft NDF recognises that delivery of affordable housing outside of the section 106 approach will also be needed in order to boost supply. It states that the Welsh Government will support delivery by providers including local authorities and by managing the allocation of funding. However, it does not state that funding will be increased and does not indicate how this would be distributed. It is therefore unclear if and how this will assist in increasing supply.
Housing and the Economy
There is a need for the planning system to support the Welsh economy, which remains vulnerable, especially when compared to the other parts of the UK. However, there is a striking absence of any strategic economic policies in the draft NDF.
The document neglects to make the link between housing and the economy in terms of the need to attract and retain a workforce of sufficient size. The translation of the Estimates of Housing Need into housing requirements would result in a smaller workforce and higher dependency ratios. In the context of the rapidly ageing population, this could restrict economic growth and jeopardise the maintenance of services and amenities for older people.
26 Jun 2019
On 5 June 2019 the Welsh Government released a publication that splits its 2018-based national and regional estimates of housing need for the years 2018/19 to 2022/23 into two tenures:
Market housing (defined as owner occupier  and private rent); and,
Affordable housing (intermediate and social rent) .
The methodology applied to generate these figures, which is based on the Housing Need and Demand Assessment (HNDA) tool developed by the Scottish Government, is illustrated in Figure 1.
Figure 1: 2018-based housing need estimates: Methodology
Source: Welsh Government Statistical Article (5 June 2019)
This latest publication takes the overall levels of housing need published in January 2019 as its starting point and so carries forward the assumptions previously applied – assumptions which, as recognised to some extent by the Welsh Government, serve to suppress the level of need. Five different scenarios are presented, based on different demographic and migration patterns.
Of the central estimate of need of 8,300 dwellings per annum across Wales from 2017/18 to 2022/23, the Welsh Government breaks this down into:
4,400 dwellings per annum (53%) as market housing; and,
3,900 dwellings per annum (47%) as affordable homes.
Table 1: National estimates of housing need by tenure (5-year averages: 2022/23)
Source: Welsh Government 2018-based estimates housing need
These arresting figures indicate a need for almost half of all new dwellings in Wales to be provided as affordable housing. It is unclear how this level of provision could be met using existing mechanisms, given that a substantial proportion of affordable housing is delivered through section 106 agreements, where viability considerations will (to a greater or lesser extent) limit the proportion of affordable homes that can be provided. Experience from existing viability assessments demonstrates that even in the strongest market areas affordable housing provision is rarely higher than 25 to 30%. In many parts of Wales, the level of provision that can be justified is significantly lower.
By comparison, in the 20 years from 1999/2000 to 2018/19, affordable housing constituted only 11% of all completions. This indicates that a requirement for almost half of all housing delivery to constitute affordable homes is not realistic under current delivery mechanisms.
If increased levels of affordable housing are to be delivered this will have to be accomplished in ways outside of the traditional section 106 approach. There is also a need to consider the extent to which overall housing delivery should be increased to help deliver additional affordable homes through section 106 agreements. For example, while the delivery of 3,900 affordable homes per annum would not be feasible under a requirement for 47% affordable housing (out of a total of 8,300 homes), it would be more likely as a smaller proportion of a larger overall housing requirement (e.g. 30% of a total of 13,000 homes). Increasing overall housing delivery would also have the added benefit of improving affordability of open market housing.
It is therefore imperative that policymakers heed the Welsh Government’s admonition that these figures should not be translated directly into housing targets. As is the case with the overall housing need estimates, the Welsh Government has clearly stated that they are merely intended to form a basis for discussion to aid policy decisions. If enacted in policy, the published figures would serve to choke off essential delivery of all types of housing, as development would simply be unviable.
The tenure breakdown of the central estimates for the three identified regions of Wales (2018/19 to 2022/23) is indicated in Table 2.
Table 2: Regional estimates of housing need by tenure (central estimates) (5-year averages: 2018/19 to 2022/23)
Source: Welsh Government 2018-based estimates of overall housing need
The estimates of housing need broken down by tenure cover a five-year period only – to 2022/23 (at the end of which Welsh Government expects the existing levels of unmet need to have been cleared). The Welsh Government intends to review the overall estimates of need with the next publication of the household projections (due to be released in October 2019). It is not yet known when the estimates broken down by tenure are likely to be published.
Alongside the estimates, the Welsh Government has helpfully published an Excel-based tool to allow users the opportunity to test the impact of alternative assumptions on both the overall need for housing and its tenure split.
The key assumptions that can be flexed include:
Household projections (official projections or modelling provided by the user);
Existing unmet need;
Household income (current and future (and distribution));
Private rental prices (current and future); and,
The tool also enables a further breakdown into a total of four tenures, with market housing split into owner occupied and private rented and affordable housing split into intermediate and social rented.
The Welsh Government has recognised that adjustments to the assumptions applied within each of the model’s criteria can make a significant difference to the estimates for Wales and its regions. For example, the default assumption is that households that can afford a 2- or 3-bedroom property based on spending 30% of their household income should be considered suitable for market housing. When considering this variable, policymakers should be careful not to assume that it is acceptable for households to spend large proportions of their income on housing out of necessity. If the affordability threshold is reduced from 30% to 25% of household income, the proportion of need for affordable housing would increase from 47% to 55% in the central estimates for Wales.
It is therefore vital that policymakers test a range of possible scenarios when setting housing requirements. This is particularly important given the current national context of economic uncertainty.
The publication of the estimates of housing need by tenure is to be welcomed as a credible starting point for the assessment of need that will inform housing requirements in the emerging NDF and forthcoming SDPs. More importantly, it is reassuring to see that the Welsh Government has acknowledged the need to test the impact of different assumptions and has highlighted a number of these sensitivities. However, it is vital that the estimates are treated as a starting point only.
What is noticeably absent from the analysis is a consideration of the links between homes and jobs, which are so important for the functioning of sustainable communities. In South East Wales, the Cardiff City Deal is seeking a step change to achieve “truly transformational change” in order to boost the local economy. This will rely on moving away from past trends (which are reflected in the 2014-based household projections) to result in different outcomes in the future.
Fundamentally, the estimates do not (and cannot, as policy-neutral statistics) seek to identify the number and tenure split of homes required to attract and retain workers to support the Welsh economy. It is therefore up to policymakers to take this next step to ensure that housing and economic objectives are aligned in the emerging NDF and future SDPs.
 Including Help to Buy and Intermediate Low Cost Home Ownership (e.g. Homebuy and Shared Ownership)
 This differs slightly from the Technical Advice Note 2 Planning and Affordable Housing (2006) definition of affordable housing, which includes intermediate housing for purchase, including via equity sharing schemes (for example Homebuy).