The government wants to build 1.5 million new homes in England across the next five years. Doing so will require rates of building far higher than we’ve seen at any time since the 1980s - and it will need local councils to plan to deliver more homes.
To help achieve that, in December the government changed the way it calculated housing need - the number of homes that each council should be planning to see built in their area. Here’s how that calculation works, and the impact it has had across England.
The starting point for determining how many new homes are needed in a particular area is a mathematical formula published by the government and known as the “standard method.”
The starting point for the standard method is that the number of homes in each area should increase by an average of 0.8% each year. This is slightly below the long-term average rate at which England’s housing stock has grown, and ensures that every council area makes a reasonable contribution to housing supply.
That baseline figure is then adjusted to reflect the affordability of homes in the area. Once median house prices exceed five times median incomes, this baseline figure is increased, with bigger increases as the gap between house prices and incomes grows.
Affordability will be worse where the demand for homes is the highest relative to supply. This step in the calculation therefore serves to increase housing targets in the areas where the need for new homes is greatest. It therefore acts to ensure new construction doesn’t simply mimic historic patterns of development.
No affordability adjustment is applied in areas where median house prices are less then five times median incomes.
For England as a whole, this formula produces a figure for housing need of just over 370,000 new homes a year. This is much higher than the average of 230,000 new homes delivered annually between 2021 and 2024, but reflects the government’s ambitions to significantly increase house building.
The affordability adjustment means there is significant variation in housing need between different regions. Greater London, for example, is tasked with delivering 88,000 homes a year (it typically averages around 35,000). In the North East, in contrast, the annual housing need is calculated to be just under 11,000 homes.
You can download a searchable table showing the calculated housing need for every local authority in England here.
Housing need - the number of homes the standard method says are required - isn’t the same as the housing target - which is the number of homes a council plans to be built. Although the two numbers could be the same, with councils planning to meet their housing need in full, they don’t have to be.
In some cases the housing target might be lower than housing need. When a council is preparing a new local plan, they might reach the conclusion that there simply isn’t enough land available to meet their full housing need. This could be because the available sites have ecological or heritage designations that would prevent development, for example. The council could therefore look to set a housing target that is lower than the standard method would suggest.
However, this sort of approach comes under intense scrutiny from planning inspectors before the plan is allowed to come into force. The council needs to be very clear what the constraints are which prevent them from meeting their housing need, and set out exactly what steps they have taken to try to overcome them. That includes working to identify alternative development sites and considering higher density development. It isn’t enough for the council to simply say they don’t want to build that many homes.
If housing need really can’t be met, councils should ask neighbouring authorities to deliver those homes for them - ensuring that enough homes are built overall.
The housing target could be higher than housing need too. Local authorities are given some freedom to plan for more new homes than the standard method would suggest, especially if that is neccessary to help out a neighouring council. It might also be needed to support their economic growth strategy, or to take advantage of planned infrastructure improvements, for example.
This new approach to calculating housing need has resulted in a dramatic increase in the number of homes that many councils are planning to deliver. When housing delivery has struggled to exceed 230,000 homes for decades - and housing targets themselves have been stuck at around that level too - the new calculation is a neccessary change to see building rates increase.
For landowners, it means now is an excellent time to try to secure planning permission for new homes on your land. Almost every council will be preparing a new Local Plan to achieve the new housing targets, and they will need to identify new sites for housing development as part of that process. Some councils will even be unable to meet housing need in the short-term, which could provide an opportunity to secure planning permission ahead of a new Local Plan.
The Strategic Land Group has been helping landowners secure permission for new homes for 15 years. Our in-house team of planning experts will identify the best strategy for winning that permission, deliver it for you, and even find a buyer for your land at the end. There is no upfront cost to you - we fund the whole process, and you only pay our fee once a sale of the site with planning permission takes place. If we don’t succeed, it doesn’t cost you anything. And that fee is a percentage of the actual selling price we achieve, so you can be certain our objective is the same as yours - to maximise the value of your land.
If this approach could be of interest to you, get in touch today for free, no obligation consultation.
