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Flawed Formula For Housing Need

Tuesday, 09 January 2018 11:59

St Albans Abbey St Albans Abbey

There is need for truly affordable housing but we are being forced into planning for far more houses than are actually needed.

The Government’s proposals for calculating local housing need are based on the widely discredited premise that simply building more houses will bring prices down.

The risk is that we end up with planning permissions that more than meet actual need, as opposed to opportunistic demand. This will result in the Green Belt and countryside being lost forever, without solving the problem of providing affordable housing.

Text of letter from Rick Sanderson, published in the Herts Advertiser, 28 December 2017

Flawed Formula for housing need

Your recent headline ‘4,500 homes on our doorstep?’ highlights the situation that Government policy over many years has brought us to. There is a desperate need for housing that ‘ordinary’ people can afford, but we are being forced into planning for far more houses than are actually needed, in the vain hope that the housing market will provide these dwellings and that house prices will come down.

‘Affordable’ housing is officially defined as costing up to 80 per cent of local market value. In south west Hertfordshire, that is clearly out of the reach of most people trying to get on the housing ladder. What is actually needed is more ‘social’ housing – provided by housing associations or local councils – at truly affordable rents or on a shared ownership basis.

Successive governments since the 1980s have failed to make sufficient provision for this. Instead, they have relied on private sector housebuilders to provide so-called affordable housing as part of their market housing developments.

Increasingly desperate measures have been introduced to try to resolve the housing crisis, culminating recently in the Government’s proposals for a new standard approach to calculating local housing need. This is based on the widely discredited premise that simply building more houses will bring prices down.

Relying on private developers to achieve this will not work. What housebuilder is going to increase output so that the unit price diminishes, resulting in them building more houses for the same or possibly reduced profit? The housing market does not operate on the simplistic ‘supply and demand’ basis that markets for other commodities do.

Government policy in the National Planning Policy Framework blurs the distinction between housing ‘need’ and ‘demand’.  Housing need can be defined as the housing that households require even if they cannot afford it, while housing demand is the housing that households are able to afford even if they don’t need it. 

The formula used in the Strategic Housing Market Assessments that local authorities have to rely on to calculate what the Government calls ‘objectively assessed housing need’ actually produces a measurement of demand rather than need.  Local authorities are then required to identify and allocate land in their Local Plans to meet this so-called need over the next 15-20 years.

The proposed new methodology for calculating local housing ‘need’ is based on the assumption that the relationship between incomes and house prices is an indicator of housing demand/need. This means that those areas where the ratio between median earnings and median house prices is highest, such as in the Green Belt that surrounds London, will be required to plan for the greatest number of new homes.  This is why St Albans district is faced with having to provide double the number of houses proposed in the previous Draft Local Plan in its new Local Plan.

If the Government continues on the path that we are now on, we will end up with planning permissions across the country that will far exceed actual need, as opposed to opportunistic demand.  This will be particularly so in areas such as Hertfordshire, with the result that the Green Belt and countryside will be lost forever, without solving the problem of providing housing that those most in need can afford.

Private sector housebuilders, who already hold enough planning permissions to build thousand of new homes, will simply cherry pick those sites in the most attractive areas that are easiest to develop, in order to maximise profits.

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Winter on the River Gade at Water End by ElizabethHamilton