Housing Land Requirement – What’s the story?

Housing Land Requirement – What’s the story?

Gordon Thomson
11 Aug 2021

This is the first blog of the series and sets out the background to the 5 year housing land supply issue as well as some of the implications of the Scottish Government’s preferred approach.  It will be followed by future blogs released over the coming week that consider in more detail the implications of the standardised method of calculating 5 year housing land supply against requirements.
The most recent position set out by the Scottish Government in relation to this issue was to be found in Scottish Planning Policy (SPP) 2020 and PAN 2/2010: Affordable Housing and Housing Land Audits. Although the recent Judicial Review[1] referred to in the cover page found the consultation that resulted in the issuing of the December 2020 amendments to SPP and the PAN 1/2020 unlawful, the finalised amendments to SPP did not change the sections on housing land supply (HLS) in any case. These remain unchanged from the 2014 version of SPP which has led to this point and are broadly similar to that previously set out in the SPP previous to that – Planning for Homes (2008).
SPP confirms (Paragraph 110) that “The planning system should… identify a generous supply of land for each housing market area within the plan area to support the achievement of the housing land requirement across all tenures, maintaining at least a 5-year supply of effective housing land at all times.
It also states that “A site is only considered effective where it can be demonstrated that within five years it will be free of constraints and can be developed for housing.
The extent to which a site can deliver, in full or in part, within the coming 5 years is also a factor in its contribution toward the 5 year effective supply.
The aim of the 5-year supply is to meet the housing supply target: the number of homes required to meet an identified need. The housing supply target (HST) tends to be lower that the housing land requirement (HLR) which includes a generosity margin of up to 20% to ensure that slippage in programming on some sites can be offset through the delivery from other sites through the allocation of additional land for housing.
Essentially, a quantum of land is allocated in the LDP to deliver houses in line with annual need and demand over the whole plan period. The delivery of homes is the outcome of this aspect of the planning system.

Various formulas

In the absence of a standardised method for comparing the HLS against the HLR and accounting for past delivery, a myriad of permutations have been utilised to demonstrate a position on the maintenance of an effective 5 year HLS.
One method is to take the annual HLR from the development plan, multiply this by 5 for the coming 5 years then compare that against the effective supply. This is known as the average method.
Another, often referred to as the compound or residual method is to do the same, but to factor in over or under performance against the target in previous years. This method may go back to the plan’s adoption date, or earlier to the baseline date of the Housing Need and Demand Assessment from which figures are derived. It may add to the requirement to factor in demolitions in previous years if this hasn’t been specifically factored in elsewhere. Last year the Court of Session offered some clarity on this calculation[i][2]
To achieve an annual HLR, either of these methods may simply divide the total HLR across the plan period by the number of years the plan or its baseline covers. Alternatively, they may be split up by phases which have varying HLRs across the plan period.
In summary, it can be very complicated.

Planning Reform

The implementation of the Planning (Scotland) Act 2019 is underway. A key tenet of this is in relation to the structure and content of the development plan. At the moment, the development plan comprises Local Development Plans (LDPs) and, in the four city regions, Strategic Development Plans (SDPs). These can each be accompanied by adopted Statutory Supplementary Guidance (SSG) which also form part of the development plan. National Planning Framework (NPF) and Scottish Planning Policy (SPP) do not form part of the development plan but are material considerations and should inform the production of SDPs and LDPs.
The emerging structure will see the deletion of SPP, SDPs and SSG. The NPF will from now on incorporate the policy previously found in SPP and be elevated to development plan status. It will also set out housing supply targets and housing land requirements (HLR) previously found in SDPs and LDPs.
It is assumed that the requirement in SPP to maintain an effective 5 year HLS will be transposed in some form into NPF, becoming a development plan requirement.

Assessing the extent of the 5 year supply of effective housing land

On 18 December 2020, an update to SPP was published alongside Planning Advice Note 1/2020: Assessing the extent of the 5 year supply of effective housing land. As stated above this has since been found by the Court of Session to have been unfair in terms of the consultation process and therefore unlawful but it clearly sets out Scottish Ministers’ view on this matter and it is reasonable to assume these changes will find their way into the draft NPF4.
The changes to SPP included amendments to the presumption in favour of sustainable development whereby this is no longer specifically of significant weight when a plan goes out of date. The effect was that the presumption couldn’t be as readily used to justify the granting of planning permission for unallocated land for housing when the plan becomes older than 5 years.

Scottish Ministers preferred approach

Scottish Ministers preferred method for calculating the 5 year land supply was set out in PAN 1/2020.
5 year supply of effective land requirement = (development plan housing land requirement / plan period) x 5
The development plan HLR referred to is the total requirement across the plan period. By dividing this by the number of years in the plan period, it is equalised and projected forward 5 years.

Potential implications

There are a number of implications arising from this approach to the calculation. Some positive, but others potentially negative.
Firstly, by standardising this issue the approach the 5 year HLR should not be as heavily contested during the determination of planning applications and subsequent appeals. Indeed, the number of appeals could be expected to fall as a result. Its application would likely reduce time and resource spent as well as providing more certainty to applicants and other stakeholders including communities.
However, the result of the division of the total HLR into an annual (then 5 year) figure is that any phasing in the HLR across the plan period is neutralised. A phased HLR which requires the majority of delivery in the initial phases will be less likely to deliver the required homes at the time they are required.
The calculation precludes the use of the residual method of calculating 5 year HLR. In doing so it no longer accounts for over or under delivery in previous years.
This means that the overall outcome of meeting the plan period HLR in full is not considered. Only the coming 5 years are at play.
If homes are delivered at a faster rate than programmed a planning authority might find itself facing a shortfall in the 5 year supply despite strong performance. Given this some Councils might consider it would be disadvantageous to facilitate early delivery.
In a similar vein, and most commonly, the under delivery of sites in the early phases of the plan period no longer need to be mitigated. A failing housing land supply that isn’t delivering new homes could be continuously rolled forward, under delivering, yet still be counted toward maintaining an effective 5 year supply.
If an underperforming supply is rolled forward then housing need and demand will not be met in that Council area. Scottish Ministers’ preferred method does not put in place any checks and balances to mitigate this.
The recent court decision that PAN 1/2020 must be quashed is welcome news to those concerned with the delivery of an adequate supply of homes in line with identified need. However, the intent to adopt or, at the very least, endorse in certain circumstances the average method is clear. If this is to resurface in NPF4, this time with primary status as part of the statutory development plan then there will be significant implications for the delivery of homes across Scotland in coming years.

Previous section:  A very average approach

This is the first blog of the series and sets out the background to the 5 year housing land supply issue as well as some of the implications of the Scottish Government’s preferred approach.  It will be followed by future blogs released over the coming week that consider in more detail the implications of the standardised method of calculating 5 year housing land supply against requirements.

[1] Opinion of Lord Clark in the cause of (first) Grahams the family dairy(property)ltd and (second) Mactaggart and Mickel Homes ltd and in the petition of Elan Homes Scotland ltd for Judicial Review of decisions of the Scottish Ministers [2021] CSOH 74, 21 July 2021

[2] Gladman Developments ltd v The Scottish Ministers [2020] CSIH 28, 3 June 2020 

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