National planning policy uncertainty leads councils to step sensibly into pausing plan-making.

Pausing plan-making given the current uncertainty around the direction of national policy is a sensible step for the councils involved. The suggestion from planning consultants that it points to an intention to set lower housing targets is unjustified, writes Ivan Tennant, GL Hearn's Head of Economic Planning.

There is no doubt that the government’s proposed planning reforms would remove significant pressure from councils to accelerate the delivery of homes. The consultation and Michael Gove’s statement issued in December have raised the expectation among councils that planning practice guidance (PPG) relating to meeting their local housing need (LHN) is likely to be loosened.

The decision by a significant number of councils to pause their local plan-making has put some commentators on the alert that they are seeking ways to deliberately plan for fewer homes.

Turning to the data

GL Hearn, member of WSP UK, has identified 23 councils that have paused their plan-making, citing the need to wait until the proposed reforms find their way into national policy, some identifying the calculation of housing need specifically.

The table below sets out a range of housing market indicators for these councils together with an assessment of their track-record in delivering homes.

Region	Council	Avg. Land Value 2019 (£/ha)	Median House Price 2022	Lower Quartile House price 2022	Median Rents 2022	Lower Quartile Rents 2022	Median Affordability Ratio 2022	House built CAGR 2011-21 (%)	Home delivery test: 2021 measurement (%)
South East	Basingstoke and Deane	£2,900,000	£340,000	£265,000	£920	£795	8.9	0.99%	182%
East of England	Central Bedfordshire	£3,700,000	£340,000	£266,000	£900	£795	10.6	1.47%	137%
South East	Cherwell	£4,100,000	£330,000	£258,000	£950	£810	9.6	1.53%	153%
South West	Cotswold	£3,750,000	£411,000	£294,500	£925	£780	13.9	1.40%	138%
South West	Dorset	£2,914,000	£337,000	£240,000	£835	£700	11.5	-2.15%	97%
West Midlands	Dudley	£1,900,000	£208,000	£160,000	£650	£550	6.7	0.49%	128%
South West	East Devon	£2,510,000	£325,000	£245,000	£750	£625	10.2	1.22%	123%
East Midlands	Hinckley and Bosworth	£1,530,000	£250,000	£195,000	£695	£595	8.6	0.94%	86%
South East	Horsham	£5,330,000	£425,000	£320,000	£1,075	£895	13.2	1.47%	147%
South East	Isle of Wight	£1,600,000	£256,000	£185,000	£700	£575	9.3	0.56%	58%
South East	Mole Valley	£7,200,000	£550,000	£369,950	£1,150	£960	13.9	0.57%	70%
South West	North Somerset	£2,310,000	£299,973	£217,500	£825	£675	10.0	0.75%	89%
West Midlands	Nuneaton and Bedworth	£1,370,000	£218,750	£169,000	£650	£575	8.1	0.73%	117%
West Midlands	Solihull	£4,270,000	£315,000	£220,000	£850	£740	7.7	0.59%	114%
West Midlands	South Staffordshire	£2,340,000	£265,000	£207,500	£750	£650	9.0	0.48%	136%
North West	Stockport	£2,400,000	£273,102	£200,000	£775	£675	9.0	0.44%	92%
South East	Surrey Heath	£5,800,000	£450,000	£315,000	£1,050	£895	11.6	0.65%	132%
South West	Swindon	£2,000,000	£250,000	£194,750	£750	£675	7.2	1.00%	92%
South East	Tandridge	£6,100,000	£500,000	£365,000	£1,200	£995	15.0	0.65%	38%
South West	Teignbridge	£2,000,000	£289,725	£215,000	£750	£625	10.5	1.02%	86%
East of England	Three Rivers	£6,900,000	£560,000	£400,000	£1,275	£1,075	13.2	0.59%	46%
London	Waltham Forest	£16,000,000	£510,000	£388,500	£1,350	£1,150	16.5	0.69%	99%
East of England	West Suffolk	£1,700,000	£285,000	£225,000	£1,050	£850	9.6	-	128%
England	England	£2,690,923	£314,894	£233,488	£861	£723	9.6	0.78%	126%

Firstly, many of the councils are not in areas of high demand where developers are likely to be clamouring to build homes. On the basis of land values and trends in house prices and rents, 12 are in areas of high demand with values well in excess of the national average. For the remaining 11, the indicators suggest relatively stable demand.

These councils have little incentive to seek a lower housing target and are more like to be focused on strengthening their land supply by overcoming funding gaps and addressing instances of market failure that frustrate housing delivery. They are unlikely to be seeking to constrain land supply through overly restrictive land supply policies.

Secondly, there is little trend in the data that the 23 councils have a weak track record in supply of homes. In the housing delivery test (HDT), 39% (9) scored under 95%, the threshold set out in PPG requiring them to produce an action plan(1). This is less than the proportion of all councils that scored less than this threshold in the 2021 HDT results overall (43%).

Moreover, when considering the annualised rate of growth in the construction of new homes over the period 2011-2021 (CAGR), while 13 of the councils have a lower rate than the average for England (0.78%), 10 have a rate of delivery in excess of this figure. Some, for example, Cherwell, Horsham and Central Bedfordshire have roughly double this rate. There is, therefore, little evidence to suggest that these councils, as a sample of councils across England, are behind in addressing housing need.

Similarly, while 13 have a median affordability ratio in excess of the average for England (9.6), 10 have one that is significantly below, for example Dudley and Swindon with MARs of 6.7 and 7.2 respectively.

The councils that have put their local plans on hold do not necessarily have ballooning market demand. Many are likely to be merely seeking clarity in a climate of uncertainty and will move on to set an objectively robust housing target in due course, drawing on relevant demographic data and market signals.

For some councils, for example Nuneaton and the Isle of Wight, market signals point to relatively low demand for homes. Often this is compounded by supply challenges. If the proposed reforms offer them an opportunity to develop housing policy that better reflects their local characteristics than a standardised approach, that is a good thing.

What to do?

It is, therefore, helpful that national policy, as currently drafted, offers an “alternative approach” to the standard method for calculating LHN set out in PPG (2). That said, exceptional circumstances need to be shown if this method is to hold water, and the approach will be scrutinised closely at examination (3).

While national policy states that these circumstances should be evidenced through demographic trends and market signals (4), PPG does not provide a specific method for how this data should be modelled to calculate housing need.

As a starting point, councils should look out for evidence that the data on which the government’s 2014-based household projections (HP) are based provides an unreliable basis for plan-making within their area. This can be done through comparisons with more recent data, including Census 2021. Evidence such as this forms the basis for a justifiable contention that they should not be used for the trend-based projections built into the standard method (step 1 of the method).

To withstand the higher test of scrutiny, it is important that councils follow the data. For many, it will not necessarily point to a radically different trend than the 2014-based HP. Also, market signals may point to a need for more, not fewer homes.

Don’t lose sleep over it

It makes sense for councils to pause their plan-making to develop their own approach to calculating housing need if that is what the planning reforms will allow. Many are rightly distrustful of the standard method. Given the variety of the councils that have chosen to do so, there is little evidence that this response is an opportunistic attempt to reduce housing targets.

Current PPG provides safeguards that those councils that do arrive at a lower number than the standard method will need to robustly defend this position at examination. These are likely to survive the current round of reforms and should give adequate comfort to those fretting that housing delivery will fall off a cliff.

If any of these issues are relevant to your work, we’d be delighted to hear your perspective.

So feel free to get in touch, you can email Ivan to find out more and to discuss issues relevant to your work.

References:

(1) PPG (Housing land supply and delivery) Ref ID: 68-042
(2) PPG (Housing and economic needs) Ref ID: 2a-004
(3) PPG (housing and economic needs) Ref ID: 2a-003
(4) NPPF, para 61