Published in Property Week, 17 September 2020
‘Algorithm’ has become something of a dirty word in recent weeks, thanks to the furore over A-level results.
So it was unfortunate for housing secretary Robert Jenrick that his recently announced suite of planning reforms also included the use of an algorithm, in this case to determine housing need in local authority areas.
It might not be as nefarious as it sounds, however. In reality, an algorithm of sorts has already been used for this purpose for several years. So what is set to change?
The proposed algorithm is an adapted version of the ‘standard method’ for calculating housing need, first introduced in 2018.
The difference is that the new iteration would incorporate existing housing stock into the calculation and remove the cap that exists under the current approach. Both of these will result in higher housing need figures overall, although a minority of local authorities may see their targets fall.
“[The new method] takes household projections, or alternatively existing housing stock, and applies an uplift based on the affordability of the average house when compared to the average salary,” explains Jonathan Dixon, director, planning at Savills. “The less affordable the typical house, the greater the uplift.”
Government is proposing to set LAs a binding number they have to meetMatthew Spry, Lichfields
Mitigating circumstances (such as ecological concerns, areas of natural beauty or green belt land) will be assessed at central government level and factored into the targets before they are handed down to local authorities, meaning they will not be able to negotiate a reduction in their numbers as they currently do.
“Currently, every local authority gets a standard number from the formula, then they say: ‘We’ve looked at our level of brownfield land, our ecology, and here’s what we think we can deliver’,” says Matthew Spry, senior director at planning consultancy Lichfields. “What the government is proposing is to do all that centrally for every local authority and set them a binding number they have to meet – no ifs, no buts.”
Analysis by Lichfields suggests that this will give the UK a new national target of 337,000 homes a year compared with 270,000 under the current approach. This overshoots even Jenrick’s stated aim to get to 300,000 a year.
Increase in housing
There is still more work to be done on the algorithm and government sources said in an article in The Times that it could still be “update[d] or refine[d]”. But Lichfields’ initial analysis suggests that all regions of the UK would see an increase in the housing required of their collective local authorities. London would be asked to up its provision to a gargantuan 93,532 homes a year, compared with a current target of 56,023 and average delivery over the past three years of 35,815.
“The growth in London is huge, and it’s undeliverable,” says Mike Derbyshire, head of planning at Bidwells.
Conservative areas in the South East – some of which have serving cabinet ministers as their MPs – could also see big increases, which could cause consternation for the government.
“It will certainly result in development on green belt and other rural sites, although the government is saying green belt status will be taken into account,” says Derbyshire.
The South East’s annual target would be increased to 61,276 from the current 49,773 under the new proposals. The region has delivered an average of 39,120 in the past three years.
This increase in the most expensive areas of the country is inevitable, because the methodology puts emphasis on affordability – but experts say the real aim of the new algorithm is to ‘level up’ the Midlands and North.
Under the standard method, these regions have delivered more homes than planned each year, and now they will be asked to stretch that further. For example, local authorities in the West Midlands currently deliver 22,003 homes a year, more than the current target of 19,667. Under the new plans it would be asked to deliver 27,503.
Planners agree that these top-down targets are a bold move, but believe they are a response to other policies not having produced the desired results.
“The government has asked local authorities to deliver on numbers and they have singularly failed,” says Derbyshire.
One area of concern is local plans, which set out how and where councils will grant planning permissions in order to meet housing need.
All councils must be operating under an up-to-date local plan by 2023, but recent research by the Campaign to Protect Rural England found that only 30% were currently doing so.
Developers say the new algorithm and government-enforced targets will help them, by making it easier for councils to formulate and stick to their local plans.
“I think it will streamline the local plan process and that will help everyone – councils, government, developers,” says Andrew Taylor, head of planning at Countryside. “We spend far too much time arguing with the housing figures. If you can remove that, that’s great.”
A Pandora’s box
However, others say that if the targets are too high, this could actually prompt councils to deviate from their local plans.
“It could open a Pandora’s box for developers to come forward with sites that aren’t allocated in the local plan, to help meet targets,” says Faraz Baber, director at Terence O’Rourke.
And that is if the local authorities even accept the targets in the first place.
Baber says this could be a particular issue in the South East, where emotions run high when it comes to things like the green belt.
It will result in development on green belt and other rural sitesMike Derbyshire, Bidwells
“Some of these sleepy shires generally don’t care what the government has come forward with and will always repel homes in their constituencies,” he says.
But it is not just about Home Counties Nimbys; it is easy to see other councils baulking at their lack of involvement in the process, too.
“Top-down targets might be difficult to get local authorities to accept,” says Spry, noting the contrast with the localism agenda espoused by the Conservative government of the early 2010s.
“It’s quite a gamble, but with a majority of 80 perhaps the government feels confident in telling them what their numbers are going to be.”
A crucial question, and one that has not yet been answered, is what will happen if councils do not meet these new targets.
If they really wanted to push housing numbers, says Baber, central government could take over local planning departments. “It could be as radical as the government taking over via the planning inspectorate and doing their local plan – but that’s not a pretty thing to have to do,” he says.
With consultation and potential tweaking still to get through, this is not necessarily the housing need calculator we will end up with. But what its introduction tells us is that, when it comes to increasing housing numbers, the government is prepared to play hard ball.