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The X-Fylde’s (A postscript to Season 1): The APS Confirmation that always was
In February my blog reviewed the first round (or shall we say Season 1?) of Annual Position Statements (‘APS’) – a new annual process introduced by the 2018 NPPF whereby LPAs can ‘confirm’ (i.e. fix) a five-year housing land supply (‘5YHLS’) position. The cliff hanger at the end of ‘Season 1’ was undoubtedly the case of Fylde Borough Council. Having reviewed the Council’s APS, the Inspector had concluded Fylde could not demonstrate a 5YHLS and thus its supply could not be fixed. This hinged on the APS Inspector’s surprising approach of applying the so-called ‘Sedgefield’ method of calculating the backlog rather than the ‘Liverpool’ approach only recently endorsed by Fylde’s Local Plan Inspector[1]. This change alone resulted in Fylde being unable to demonstrate a 5YHLS. The Council, much aggrieved, chose to legally challenge the APS Inspector’s conclusion. Only slightly ahead ahead of the next round of APS submissions, we have our conclusion to this most thrilling of tales. On April Fools’ Day, the Secretary of State consented to a High Court Order that quashed the original APS Inspector’s January 2020 report. The Schedule to the Consent Order sets out the position: “The Inspector concluded, on the evidence, that the Claimant was unable to demonstrate a five-year supply of deliverable housing land as at 1 April 2019. That finding turned on the Inspector’s decision that the Sedgefield methodology should be used to address housing shortfall when calculating the Claimant’s housing requirement, as opposed to the Liverpool methodology endorsed by the Local Plan Inspector. He was not entitled to use a different housing requirement from that set out in the adopted Policy of the Local Plan. Paragraph 73 of the NPPF provides that local planning authorities “should identify and update annually a supply of specific deliverable sites sufficient to provide a minimum of five years’ worth of housing against their housing requirement set out in adopted strategic policies, or against their local housing need where the strategic policies are more than five years old”. Consequently, NPPF para. 73 defines the “housing requirement” against which an authority’s five year housing land supply should be assessed i.e. it is the housing requirement set out in adopted strategic policies where (as in the present case) those policies are less than five years old Consequently, and for the above reason, the Inspector erred in law by using a housing requirement that differed from the minimum housing requirement in Policy H1 of the Claimant’s recently adopted Local Plan” (our emphasis) The order is unequivocal. One cannot choose to use a different housing requirement to that which has been adopted in a sound, up to date Local Plan. The clarity of the Consent Order, the fact the Secretary of State didn’t defend the Inspector’s approach, and that this error was made on the first round of a brand new process (and with only three Councils submitting themselves for consideration) – does make one wonder how the Inspector’s rather bold approach to Fylde passed through the net. A fresh APS Inspector’s report has now been published (dated 6th May 2020) which unsurprisingly finds that Fylde can now indeed demonstrate a 5YHLS (5.1 years) on the basis of using the ‘Liverpool’ method to calculate the Council’s backlog. So what does this mean? Well, Fylde now has its 5YHLS confirmed until the 31st October 2020 and this can’t be challenged in appeals ahead of this date. Thus, two out of the three LPAs that submitted an APS in the first round of submissions have now had their 5YHLS supply confirmed[2]: trebles all round. However, this postscript to Season 1 of the APS saga will soon be superseded. The next APS round has already begun and Fylde has signalled to PINS its intention to submit a new APS and will need to do so to PINS by 31st July (along with five other LPAs: Milton Keynes, South Kesteven, Stockton on Tees, Sunderland and Wyre). Fylde will thus either have its supply confirmed once again in October of this year (assuming PINS meets the deadline) or alternatively an Inspector could find it can no longer demonstrate a 5YHLS on the basis of its new APS. In the event of the latter, the Council will lose the ability to submit an APS until such time as it adopts a new local plan[3]. Fylde had demonstrated a 5YHLS by the barest of margins in its just confirmed position this time round (a surplus of just 35 units); has that position improved or worsened in 12 months? Fylde may have bought itself five months of 5YHLS safety, but it still may yet be written out of Season 2. [1] Under ‘Sedgefield’ any backlog in housing delivery is to be met within the 5YHLS period, Under ‘Liverpool’ the backlog is spread over a longer timescale, typically to the end of the plan period. [2] The third – Mid Sussex – fell at the first fence, because its Local Plan was not “recently adopted” as defined by NPPF Footnote 38[3] The two options for confirming a supply is through either a ‘recently adopted’ 2019 NPPF-assessed plan or through a subsequent APS (PPG ID: 68-004). The guidance states that to submit an APS the LPA must either have (ID: 68-013) a recently adopted plan (2019 or 2012 NPPF assessed) or a confirmed land supply following a previous APS. On this reading, any LPA that is found not to have a 5YHLS through the APS process, or simply fails to submit an APS when its local plan (2012 or 2019 assessed) is ‘recently adopted’, loses the ability to confirm its supply until it adopts a new local plan.  

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Setting the standard: Towards a new method for housing need
A decade has passed since the abolition of Regional Strategies and the introduction of a requirement for local authorities to “objectively assess” their own housing need (so-called OAN). Over that time, few issues have been so significant for local planning authorities and the development industry. The NPPF objective of “significantly boosting” the supply of homes is longstanding. The ambition to deliver 300,000 dwellings per annum (dpa) by the mid-2020s is established at a national level. Despite recent increases in supply, a 25% increase on the completions achieved in 2018/19 is still required. The loss of several months’ development activity and an economic crisis due to COVID-19 only increases the challenge. The 2018 NPPF introduced the standard method (SM) for assessing Local Housing Need (LHN), driven by a desire for a more transparent, simpler and swifter approach than OAN. However, the release of subsequent demographic projections (2016 and 2018-based) with a different ONS methodology immediately undermined it, leading to an interim ‘quick fix’ falling back on the 2014-based projections, with a review of the LHN approach promised this summer. Current events mean timescales are up in the air, but a new method is coming. And so it should. The 2014-based projections are long in the tooth, and LHN sums to 271,000dpa. Whilst higher than current delivery, it remains 10% below the 300,000 ambition. Further, its lower outputs in the north have resulted in well-ventilated concerns that it cuts across the ‘levelling-up agenda’. It has also concentrated too much need in London where lack of available land, Green Belt, and absence of strategic planning across the M25 mean it will not be met. There is little appetite to return to the former OAN approach and we assume that reverting to old-style regional planning (or abandoning housing targets) is not on the Government agenda. This blog provides some thoughts on the broad approaches that might inform a new method that would work with the grain of the current NPPF and local plan system, be consistent with 300,000 dpa and respond to the Government’s other criteria: Stable outputs to help LPAs prepare local plans; ‘Levelling-up’; Addresses affordability; Focuses growth on urban areas; and, Reasonable, justified, straightforward. 1. Retaining the demographic projections? Demographic projections have provided the basis for LHN for decades, so sticking with them would represent continuity. Presumably any such approach would retain an adjustment to reflect affordability, but the method could perhaps be amended with greater emphasis on other considerations such as economic growth. The difficulty stems from the projections themselves. We await the SNHP, but the 2018-based SNPP reveal a significant reduction in population growth nationally (10.3% over 25 years, compared to 16.5% in 2014-based SNPP). It also indicates less growth in London, South East and East which are areas with, still, the greatest problems of affordability. Figure 1: Comparison of population growth projected by 2014 and 2018-based SNPP Source: 2014 and 2018-based Sub National Population Projections Although the current method applies a market signals uplift, if applied to a low household growth figure, the result will do little to improve access to affordable housing and have negligible impact on affordability (because house prices are set by whole housing market not just new households). Applying the latest 2018-based projections to the current SM would reduce the national need figure to c.209,000dpa – less than is currently being provided and undershooting 300,000 by a third. Relying on volatile projections also fails the test of stability. Perhaps ONS could formulate them in a different way, but this seems unlikely in the timescales. We may have reached the end of the road for the use of projections as the starting point for assessing LHN. Figure 2: Comparison of housing need based on LHN methodology (with 2018-based SNPP), recent delivery and current LHN Source: 2018-based SNPP, CLG Live Table 122, Lichfields analysis 2. Stock-based approach One alternative is a stock-based approach where the LHN for each LPA will be proportionate to the number of existing dwellings (a “fair share” approach). This would help to achieve both the levelling-up and urban focus sought by Planning for the Future and hinted at by the Secretary of State . When there is constrained land availability or tight administrative boundaries, an urban focus will require better duty to cooperate mechanisms for distributing unmet housing needs across the hinterland, 300,000dpa equates to 1.24% of the national dwelling stock. At its most simplistic, applying this percentage to each LPA results in a need figure that would be the same/higher than the current LHN for 69% of authorities. Rather than simply apply a percentage uplift, it may be appropriate also to take account of the relative affordability of districts. For example, a 1% stock growth starting point and an upward or downward adjustment using the current SM approach. We calculate that this would result in a total of around 325,000dpa – 10% above the Government’s target and sufficient to provide flexibility to reflect some areas not being able to meet needs. As time goes on, the Government could calibrate the formula to its housing delivery ambitions by adjusting the stock percentage and affordability formula. 3. Cascading 300,000 dpa A “top-down” approach could seek to disaggregate the 300,000dpa target to local authorities on the basis that they each take a specific proportion based on one or more different factors. This “cascade” could perhaps be based on ONS projections or its housing stock, with adjustments based on affordability or other factors. The problem is that if you start with 300,000 you have to be very confident that every LPA will either meet its need in full or properly ensure unmet need is distributed to its neighbours. 4. Trend-based approach A further alternative – albeit an undesirable one – might be to base needs on past delivery. Such an approach goes against the policy objectives to boost supply as it results in a form of negative circularity for areas seeking to reduce housebuilding. 5. Economic-based It is possible to link employment growth to housing needs (commonplace within econometric models), but there are shortcomings: government would need to endorse a particular view on local economic growth levels when the basis of such forecasts is often opaque and contested; employment forecasts can be volatile (particularly at times, like now, of economic shock); job growth is not always the primary driver of housing need in a local market; and districts are typically smaller than travel to work areas containing both economic hubs and commuter areas. 6. Affordable Housing-based Current approaches for assessing affordable housing need could be utilised, and then grossed-up to reflect the role of market housing in supporting its delivery. Unfortunately, there are data limitations and experience suggest this generate unrealistic outputs. 7. Hybrid The solution may lie in a blended approach that draws together two or more of the above strands into a singular approach. But will it be simple and straightforward? The takeaway The current SM has resulted in a number of unintended consequences. The new approach should seek to address them – this probably means reduced reliance on volatile household projections. We may need an amalgam of different approaches to reflect the nuances and difficulties of each area, but we will not achieve a perfect system that achieves simplicity at the same time as working for everyone and every location. But there are two safety valves: 1) there should continue to be the ability in a very small number of cases to allow exceptions to the methodology; and 2) need is only the starting point, all areas will have the ability – as now - to justify not meeting LHN if to do so would not be consistent with the NPPF. We can and we must do better than the current approach. And once we have established a method for assessing how many new homes we need– and it is required urgently to support plan making - we can then focus on delivering them.

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