NHPAU UNVEILS ADVICE TO GOVERNMENT ON
FUTURE HOUSING SUPPLY RANGES
Unit recommends upper and lower levels for annual
housing supply additions to be tested by English regions
The National Housing and Planning Advice Unit (NHPAU), the independent body whose remit is to advise on how to achieve better housing affordability in England, has made key recommendations to central Government on the planning process and future housing supply.
The Unit’s advice paper[1] outlines the long-run housing supply ranges which it believes should be tested by the English regions through the planning process. This includes lower and upper ranges, which take into account demographic, economic and housing affordability trends. The figures recommended by the NHPAU are ranges to be tested and are not regional housebuilding targets.
The Department for Communities and Local Government (CLG) will consider the NHPAU’s advice as it finalises its own formal guidance to regional planning authorities about the approach to be taken by them in the up and coming Regional Spatial Strategy (RSS) reviews.
The 2007 Housing Green Paper said that these reviews should be completed by 2011 to reflect plans for 240,000 homes a year by 2016. It indicated that Government guidance on taking forward reviews would be based on the independent advice of the NHPAU.
“We are at the beginning of a period of adjustment in the housing market. And while inevitably there is now a focus on the gloomy short-term prospects and some uncertainty arising from this, for the sake of communities and future generations it is vital that planners and decision makers keep an eye on the medium and long term”, said Stephen Nickell, Chair of the NHPAU.
“This is about acting now in advance of the next upturn. It is about ensuring that plans for new homes to be finalised by 2011 cater effectively for people’s legitimate expectations and aspirations.
“In developing our advice, we have been mindful of the obligation on planning authorities to consider matters of affordability. We also recognise the more traditional demographic-based approaches to planning for new homes. In deriving our advice we have therefore drawn on both these approaches.
“Given the difficult immediate outlook for the economy and the housing market, we have also been cautious about the assumptions which underpin our analysis, for example about earnings growth, interest rate prospects and levels of future household formation.
“Our advice is not a target. It is a proposed supply range to be tested – we have provided the ‘bookends’. These should provide sufficient flexibility for regional planning authorities to deal with a range of outcomes reflecting regional priorities and circumstances.
“It is now for CLG, the Housing Minister and the Secretary of State to consider our advice and decide how it should be tested by the regions.”
The NHPAU will be available to discuss its full advice in more detail with regional partners and other stakeholders over the coming weeks. As they move through the review process there will also be assistance to help develop their affordability analysis.
More formally, NHPAU will engage with the RSS review processes, for example in providing evidence to Examinations in Public - not only to explain its supply advice but also to provide a view about the implications of emerging regional planning authority supply proposals.
The recommended supply range figures are listed below. The bottom of the range is broadly consistent with the Government’s targets for 3,000,000 new homes by 2020:
Table 1 NHPAU Recommended Supply Range for the period 2008-2026
|
|
BOTTOM OF THE PROPOSED HOUSING SUPPLY RANGE |
UPPER END OF THE PROPOSED HOUSING SUPPLY RANGE |
||||||
|
Region |
Average annual net additions to 2026 |
Minimum delivery point by 2016 |
Total net additions by 2016 |
Total net additions by 2020 |
Average annual net additions to 2026 |
Projected delivery point by 2016 |
Total net additions by 2016 |
Total net additions by 2020 |
|
North East |
6,700 |
6,600 |
61,500 |
87,800 |
7,500 |
7,600 |
66,800 |
97,300 |
|
North West |
26,600 |
27,600 |
228,900 |
339,300 |
29,500 |
31,300 |
247,700 |
373,000 |
|
Yorkshire & Humber |
23,800 |
25,100 |
202,100 |
302,500 |
26,400 |
28,300 |
218,300 |
331,700 |
|
East Midlands |
23,400 |
23,700 |
207,000 |
301,900 |
24,600 |
25,300 |
214,500 |
315,500 |
|
West Midlands |
19,000 |
19,800 |
164,100 |
243,200 |
22,600 |
24,300 |
186,600 |
283,700 |
|
East England |
30,600 |
32,100 |
259,600 |
388,000 |
39,200 |
43,000 |
314,300 |
486,300 |
|
London |
33,800 |
35,500 |
286,600 |
428,500 |
42,600 |
46,700 |
342,400 |
529,100 |
|
South East |
37,800 |
38,700 |
331,500 |
486,200 |
49,700 |
53,800 |
407,200 |
622,500 |
|
South West |
29,800 |
31,000 |
255,600 |
379,600 |
34,800 |
37,400 |
287,400 |
436,800 |
|
England |
231,500 |
240,100 |
1,996,900 |
2,957,000 |
276,900 |
297,700 |
2,285,200 |
3,475,900 |
For further editorial information please contact Graeme Buck / Tom Pienaar / Jo Lloyd, Camargue, tel 020 7636 7366.
1. How the NHPAU developed its recommended supply range
The Unit worked closely with officials from the regional assemblies, development agencies and government offices (the regional partners) in developing its advice. Several working meetings were held with all regional partners in each region. The objectives of these sessions were to:
§ Initiate dialogue and share the analysis behind the NHPAU’s response in October 2007 to the Government’s Green Paper and to explain its new role.
§ Achieve a good understanding of each region, for example particular circumstances, progress with RSS delivery, Strategic Housing Market Assessments and Local Development Frameworks.
§ To discuss and seek feedback about the methodology to be used to develop its supply range advice, and the evidence emerging from its work.
In developing its advice the NHPAU used:
§ The Affordability Model, commissioned by the CLG and developed by Reading Business School, which relates data about the housing market, labour market and demographic trends. The starting point for analysis is to understand what level of supply would be required, all other things being equal, to achieve stabilisation of affordability, over the RSS time horizon, in each region.
§ The Demographic Method - based on household projections, this traditional approach used by planning authorities was expanded to take into account other factors, such as planning to tackle constrained demand over the RSS time horizon, for example as exhibited through overcrowding or sharing. In addition, allowance is made for factors such as vacancies and second homes.
2. Why the NHPAU has researched its recommendations
Last year’s Housing Green Paper set out the following role for the NHPAU:
‘We propose to strengthen the evidence base for those early reviews by issuing formal guidance at the beginning of the RSS preparations on the ranges of housing provision required over a 15 to 20 year period. This guidance will be based on the independent advice of the NHPAU.
‘We will expect Regional Planning Bodies and Examination in Public Panels to test these options so that the Secretary of State can be fully informed when taking the final decisions about appropriate levels of housing provision in approving the RSS.
‘It is Government’s role to set the overall housing ambition for the country and for the regions, acting upon the advice of the independent NHPAU and considering the national interest in the round.’
3. About the NHPAU
The NHPAU is an independent body that has been set up to help make homes more affordable across England. It is made up of some of the country’s leading economists who provide expert guidance to regional and national bodies to ensure we deliver the right number of homes, of the right type, in the right place and at the right time.
Since April 2007, planners and government have to consider affordability when deciding future housing supply. The job of the NHPAU is to tell them how they might achieve this and make a positive impact on housing affordability in England.
The Unit is chaired by Professor Stephen Nickell, CBE, FBA a former member of the Bank of England Monetary Policy Committee. He is currently Warden of Nuffield College Oxford and non-executive member of the new Statistics Authority.
The Unit is delivering a new research programme as a resource for regional partners and others on housing market affordability. It is also developing a toolkit to allow forward-looking economic and statistical analysis of the impact of planned housing provision.
i. Economist Kate Barker’s Review of Housing Supply in 2004 identified that the demand for housing is outpacing supply, and this is pushing up prices.
ii. The Government wants to make housing more affordable across the country. What this means is building enough new homes, in the right places, to meet demand.
iii. Between 1997 and 2007 average earnings increased by 45% (Source: ASHE, ONS) while the average house price increased by 171% (Source: CLG from Land Registry Data). The ratio of lower quartile house prices to earnings doubled in the same period.
iv. Barker’s review produced a series of recommendations about improving the supply of housing in England. This included the creation of a body to provide expert advice on housing matters, particularly affordability. The NHPAU is the result.