Planning matters

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Size(mix) matters

Size(mix) matters

Simon Coop 24 May 2018
Housing issues are never far from the headlines, and one simple truth lies at the heart of the matter: we are not building enough new homes. But in addition to ensuring that sufficient new homes are delivered, we must also ensure that an appropriate mix of housing is achieved. If the emerging housing supply does not reflect the needs and demands of existing and potential future residents, there is a risk that an imbalance will emerge between the supply of and demand for certain types of residential property. The consequence would be that the prices of those properties that are more in demand would increase at a faster rate than that of the overall housing stock, exacerbating affordability issues and undermining the ability of certain sectors of the population to meet their housing needs.   The importance of achieving an appropriate housing mix is reflected in government policy, which states at paragraph 50 of the National Planning Policy Framework (NPPF): “To deliver a wide choice of high quality homes, widen opportunities for homes ownership and create sustainable, inclusive communities, local planning authorities should: “Plan for a mix of housing …; “Identify the size, type, tenure and range of housing that is required in particular locations, reflecting local demand…;” The draft NPPF launched for public consultation in March 2018 adopts a similar approach; paragraph 62 states: “Policies should identify the size, type and tenure of homes required for different groups in the community…” The current PPG provides some detail about how to identify the need for certain types of housing and the needs of different groups, but does not provide any specific guidance on how to identify the mix of different house sizes that is required. Lichfields has launched a new product, Sizemix, which provides a robust and transparent means for identifying the size, type and range of housing that is required in a local area, in line with national policy. A complex relationship Understanding the right mix of housing relies on an appreciation of the differences between housing need and demand. This difference is particularly acute in the open market sector, where households are free to occupy housing in accordance with what they want and can afford. In this context, whilst housing need draws solely on the size and structure of individual households, housing demand reflects the reality that many people will often deliberately under-occupy their homes and thereby express a demand for a property that is larger than they might specifically need. For example, a couple might only need a one-bedroom property but might want a larger property. This pattern leads to a combination of overcrowding and under-occupation. According to the latest available ONS’ standards of occupancy[1], 700,000 households in England were overcrowded at the time of the 2011 Census, of which over 400,000 were households with dependent children. A total of 3.8m households (c.20%) occupied housing in line with their needs, whilst 7m households had at least 2 spare bedrooms. Figure 1 provides a breakdown of occupancy patterns by household type. The highest levels of under-occupancy are amongst older households and couples without children, compared to the highest level of over-occupancy amongst households with children and multi-adult households. Figure 1 Occupancy patters in England by household type Source: Census 2011. Excludes social rented. Table 1 considers the relationship between household and dwelling size in more detail by illustrating the occupancy patterns of all private sector households in England. It shows that 2-person households in 3-bed dwellings form the largest household-dwelling group, with 16.1% of households falling within this group. Contrary to what might be expected, most single person households (19.9%) occupy 2 and 3-bed dwellings, with relatively few occupying 1-bed dwellings. Interestingly, a similar number of 5-bed dwellings are occupied by 4-person households as by 2-person households. Table 1 Household size by number of bedrooms Source: Census 2011. Excludes Social Rented Households Explaining the relationship between household size and dwelling type A range of factors impacts on housing requirements, in addition to household size. The fact that many people view their home as an investment means that they will often seek to buy one that they can afford, rather than the space that they actually need, even though such a property might be too large. Having spare bedrooms is viewed positively by many households; it provides flexibility for changing circumstances (such as the birth of a child) and allows visitors to stay, with both being significant factors for many people when searching for and choosing to buy a new home. Another factor that might influence the current and future demand for larger homes is the trend for working from home. There has been a steady rise in the proportion of people in employment working from home. As of 2017 this stands at 13.6% of people in employment. Increases in the number of people working from home may translate into a demand for larger housing as people seek additional space for use as an office. Whilst some changes to households result in the need for larger properties, others may create the opportunity to downsize – for example, when ‘empty-nesters’ no longer need all the space in their family home. However, as shown above, this often does not happen, with 2.4m households (84%) over the age of 65 having at least 1 spare bedroom, and just 718,000 (15%) occupying housing in line with their ‘needs’. This might relate to a lack of sufficient supply of housing products perceived to be attractive to those downsizing, but equally research suggests there is simply a strong preference from many people to remain in their existing home. The English Housing Survey shows that older households are the least likely to move, with just 2.3% of households over the age of 75 and 3.1% of households aged between 65 and 74 moving in the previous 12 months. By comparison, younger Sizemix Within the context of a need to increase the rate of house building, it is of critical importance to ensure that an appropriate mix of housing is provided to meet demand. Sizemix represents an important addition to the range of tools provided by Lichfields. It supports all involved in the development process by helping to ensure an adequate supply of the right type of houses can be delivered, in line with local requirements. Further details of Sizemix are available here. Please contact any of our offices to discuss how we might be able to assist you.   [1] Occupancy as defined using ONS standard of occupancy. Occupancy rating of -1 or less indicates overcrowding, +1 or more indicated under-occupancy.  

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The local impact of new housing in the North East
In the draft National Planning Policy Framework (NPPF) and associated draft Planning Practice Guidance (PPG) that were recently consulted on, there was a welcome, albeit brief, nod towards the benefits that new development can bring to a local area. The draft guidance states that local authorities should do more to publicise the local environmental improvements (e.g. to highways, open space and education) that developers make contributions towards. It is suggested that this could be achieved through on-site signage or even designing websites that help to inform the public about exactly what new developments are contributing to their local areas. From a development industry perspective, anything that helps to encourage public support for new development is welcome.   One issue, however, that is persistently absent in terms of helping achieve widespread public support is the impact of new development - particularly new housing - on local house prices. Most people have an understanding of the factors that can affect house prices; it is well known that the location of a nearby station, or a school with an ‘Outstanding’ Ofsted rating can increase the desirability of an area and can, over time, increase property values. New housing development, by contrast, is often cited as a factor that will adversely affect the value of nearby properties and local support for new housing development can weaken as a result. Despite this not being a material consideration in planning decision-making, it is still of course a concern for local residents, given that a house, for many, is likely to represent one of their largest financial outlays and investments.    Clearly, there is a need to improve understanding of how 'microscale' factors affect house prices at a local area level. The challenge associated with this is in distinguishing the effects on house prices that are directly attributable to any one particular factor from a range of other complex factors. This problem is felt more acutely at a local level, where a reduction in scale coincides with an increase in the significance of factors that are location-specific.    At Lichfields, we have carried out research that has adopted an evidence-based approach to this topic, by examining the ‘house price effects’ across 26 new housing sites in the North East of England. Sites sampled ranged in terms of their size, density, character, relationship to existing urban form, previous use classification and of course the surrounding housing market strength. The principal aim of the research was to develop a simple, yet robust methodology that quantifies house price change within a local area. Our Insight Focus outlines the approach taken and describes the results in more detail.   What we have found is that there is no strong evidence to suggest that adverse effects on property values took place in areas surrounding new housing development. In fact, when aggregated across all sites, a positive price effect of around 4% was determined. The methodology for measuring house price change, combined with a highly-localised sampling strategy, gave us a degree of confidence to conclude that new local housebuilding is highly likely to have a major impact on the observed positive price effects. In fact all seven of the local authorities sampled demonstrated positive price effects, with County Durham, North Tyneside and South Tyneside performing well in this respect. The results also suggested that greenfield and rural-urban fringe sites performed marginally better than brownfield and urban sites. Within the context of the North East housing market, mid-range value areas performed the best.       In almost all of the 26 new housing sites the point after which the first unit sold coincided with an increase in housing market activity (number of transactions) that was independent of the new build sales. This suggests that new housing can actually re-invigorate a local housing market, possibly by triggering a displacement effect. This could also help to explain the mechanism by which local area house prices may rise as a result of new housing development in the area.     Whilst we are keen to acknowledge the limitations of this research - it’s relatively narrow geographical focus and moderate sample size being two - we also recognise the potential for this type of study to be carried out in other regions of the UK. Our research contributes to an improved understanding of local area level house price change and if conducted in other areas too, could be a way of reassuring local residents that new homes in their area will not adversely affect their house price. This could in turn support more positive public engagement locally, when planning for new homes. See our other blogs in this series: National Planning Policy Framework review: what to expect? Draft revised National Planning Policy Framework: a change in narrative NPPF consultation proposals – what could they mean for town centres? NPPF consultations – what could they mean for designers? Draft NPPF: heritage policy is conserved… Draft NPPF: implications for aviation? Draft NPPF: Business as usual? Draft NPPF: more emphasis on healthy and safe communities Lichfields will publish further analysis of the consultation on the revised NPPF and its implications. Click here to subscribe for updates.

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