Local Plans Expert Group

Thoughts on LPEG OAN methodology – Appendix 6




As part of the Local Plan Expert Group (LPEG) report to Ministers (as part of the March 2016 budget) are proposals for a prescriptive method to assess housing need (or objectively assessed need (OAN)). This can be found in Appendix 6 of the LPEG report and seems to have been driven by the observation that discussions about the assessment of need (at both Local Plan and Section 78 inquiries) provide little agreement between parties and often lead to delays in the plan making process.


Whilst providing clarity about how to measure need has to be seen as welcome, it can only assist the plan making process if the methodology is sound and not demonstrably flawed. Unfortunately, the LPEG methodology contains a significant amount of illogical advice which will in effect double count needs as well as not allowing a proper understanding of local circumstances. In short, it is not possible to measure housing need using a one size fits all methodology; locations are different and this needs to be reflected in guidance.


Without even undertaking analysis, it is clear that the LPEG proposals will shows levels of housing need that are substantially higher than is currently suggested in household projections (at a best guess maybe up to 45% higher). This is likely to be particularly focussed in London and the South East and to a level where there will be major conflict with the Green Belt – this will not help to speed up delivery and will almost certainly inhibit community confidence.


There are six main areas of analysis dealt with by LPEG and these follow the typical process as currently set out in Planning Practice Guidance (PPG) and followed by inspectors when assessing housing need. Below is a summary of the key points under a range of headings:


Population Projections – LPEG suggests in looking at population growth that both official projections and a projection based on 10-year migration trends should be used; and that the highest figure should inform the OAN. The two main problems with this approach are a) that by always taking the highest figure it will be the case that some of the population will be counted in more than one location and b) it fails to recognise spatial differences between short- and long-term projections (e.g. the observed phenomenon that since about 2008 (start of recession) rural and urban areas have typically seen changes to migration patterns).


Household Formation Rates – LPEG suggests that household formation rates for the 25-44 population should be returned in modelling to halfway between 2012- and 2008-based rates. As a broad assumption (say at the national level) this might not be a bad approach; however, it completely breaks down at smaller area level and fails to understand the reasons why rates have changed in the past. In particular, this type of analysis needs to recognise the impact of international migration and growth in BME communities as well as suppression in the housing market – this has not impacted equally across areas.


Vacancy Rates – LPEG suggests that a vacancy allowance should be applied to household projections and that this rate should be assumed to return to the national average where it is currently higher. On the face of it, this is arguably reasonable; however, yet again it fails to recognise that areas are different. Particularly where there is currently a larger proportion of second/holiday homes, this method will suggest a very small housing need in comparison to the household growth.


Employment Trends – LPEG suggest removing an assessment of the link between jobs and homes from the OAN methodology. This looks to be short-sighted; given para 158 of the NPPF, it is critical to understand the alignment between jobs and homes, and whether a different spatial distribution of housing is appropriate. LPEG also suggests that where an economic-led approach is to be used then figures must be modelled using OBR economic activity rates. Because the OBR rates bear no relation to the economic forecasts typically accessed by local authorities it is inappropriate to use these rates when trying to look at the link between jobs and homes.


Market Signals – LPEG suggest a simplified approach to market signals (with just two indicators). This looks to be a reasonable approach; however, the reaction to adverse market signals is not. LPEG just suggest a blanket uplift to housing need (of up to 25%) and this uplift will be driven (by implication) by increased population growth and will therefore introduce further double counting into the analysis (i.e. it will assume that some people live in more than one place at the same time).


Affordable Housing Need – at this stage LPEG have not suggested a methodology for assessing affordable need. They do however suggest a further uplift (of 10%) to the OAN where affordable need is relatively high. This approach will simply add further double counting into the analysis and cannot be considered as robust. The LPEG report also fails to understand that the link between affordable housing and OAN is complex, with a need for affordable housing not necessarily translating into a need for more housing per se.


Overall, the LPEG suggestions from a technical perspective are workable. However, they are very poorly thought through and will not establish the need for housing. At many stages, the proposed method will double count needs (and this is on a progressively cumulative basis) whilst some of the more technical aspects (such as the approach to vacant homes and the use of OBR economic activity rates) shows some naivety in the practical outputs.


It is unclear what will actually happen if these proposals are adopted (e.g. will it really speed up the planning system). However, one thing is for sure; the need for housing will not be properly assessed and this seems unlikely to assist in a plan-led system.


Our view is that the PPG is actually pretty good and just needs some small refinements to make it more workable. This would not necessarily remove any discussion of housing numbers at Local Plan or Section 78 Inquiries but could help to focus on key local issues. For any piece of research to be robust it does need to reflect the locality on which it is based. The key issues as we see it would be to strengthen guidance on the following topics:


  • Population projections – LPAs should use both official projections and sensitivities based on longer-term trends to inform their housing need. Neither will give a definitive output and local evidence should be used to determine the most appropriate scenario (for example understanding the impact of housing delivery and international migration on past and projected population growth). Where an area considers that a lower level of population growth (than shown in official projections) is justified it must also seek to understand those areas which will be planning for higher levels of growth.


  • Economic forecasts – should be used to inform levels of housing need. Such analysis should be used to assist in determining the locations of housing as well as overall levels of need (noting for example that increasing population projections in one area will mean commensurate reductions in other locations). Economic-based assessments should not be used to set the OAN other than where a LPA can demonstrate across the HMA (or wider area) that all housing need is being accounted for.





The Communities Secretary, Greg Clark MP, and the Minister for Housing and Planning, Brandon Lewis MP, established a “Local Plan Expert Group” in September 2015, with a remit to consider how plan-making could be made more efficient and effective. The Local Plan Expert Group (LPEG) reported back to Ministers on 16th March, with recommendations.


The LPEG Report to Government proposes some significant changes to the process to plan making, including the approach and guidance for assessing housing needs, through the adoption of a simplified and standard methodology. This, together with the LPEG’s wider proposals, are being consulted on by Government until 27th April 2016.


Whilst proposals are still in draft form it is difficult to know if these will be accepted either in part or in full (or indeed not at all). Our overall view of the proposals with regard to the assessment of housing need is that providing some clarity is welcomed, but the methodology suggested will result in unrealistic assessments, substantially double counting needs (i.e. suggesting that people need homes in more than one location) and providing less certainty about the level of housing that local authorities should be planning for. What is clear (even without undertaking the analysis) is that the levels of ‘need’ emanating from the LPEG proposals will be significantly higher than is suggested by any modelling of population and household growth.


The discussion to follow focuses solely on the assessment of housing need and can broadly be separated into the following discrete headings:


a)     Migration and Population Projections

b)     Household Formation (Headship) Rates

c)      Vacancy Rates

d)     Employment Trends

e)     Market Signals

f)       Affordable Housing Need


As a preamble it should be recognised that the NPPF seeks to ‘boost significantly the supply of housing’ (para 47) and this to some extent seems to be driving the LPEG proposals which will certainly uplift housing numbers (often expressed as the OAN). However, the LPEG position may not be fully understanding the reason for this ‘boost’. The NPPF is clear of the need to boost housing supply, and such a boost is in relation to the low levels of delivery seen in the recent past – over the past 10-years (to 2015) the number of completions (in England) averaged about 130,000 per annum. This figure can be compared in light of the most recent (2012-based) CLG household projections which show household growth of about 212,000 per annum (2014-35) which once account is taken of vacant homes and supressed household formation (as per current guidance) would arguably rise to about 240,000. Hence the ‘boost’ sought in the NPPF (and PPG) is to increase delivery to the sort of levels required by the growing population – not to boost delivery beyond what is actually needed.


Migration and Population Projections


The first suggestion in the LPEG report is that the demographic start point should be the higher of modelling data based on the latest official projections and looking at migration trends over the previous 10-years.


Using a sensitivity test for 10-year trends is agreed as being a good approach and will reduce the number of potential permutations in looking at difference reference periods (recognising that parties with differing interests would look at different reference periods depending on the argument they wish to make). However, it cannot be agreed that simply taking the highest of the official or 10-year trends should form the start point for the assessment of need.


This is simply a common sense point. The aim (as we understand it) is that the level of housing to be delivered should be the level of housing needed by the current population and the population moving forward. This is projected nationally through ONS national population projections. Clearly if all areas were to set the OAN on the basis of the highest of two projections then the total OAN nationally will be catering for a greater population than is actually expected. This could only be achieved by increasing net international migration and would therefore fly completely in the face of the Government’s stated aims to reduce net migration moving forward (as well as being inconsistent with national projections).


There needs to be a logic check here and an understanding of local factors. It is the case that many areas have seen weaker population growth since the recession (mainly rural areas) but the flip side to this is that urban areas have seen higher levels of growth. The reason for this is that ‘traditional’ household movements away from urban areas have generally slowed down, with this at least in part being due to housing market factors (such as access to mortgage finance and less certainty in the jobs market).


The use of a 10-year trend is therefore perfectly reasonable but retaining the SNPP in areas where population growth is projected to be higher may not be. The evidence on this needs to be considered in the round. using the highest of the projections will clearly introduce an element of double counting; put simply someone cannot live in two (or more) different places at the same time.


Whilst the LPEG is trying to put some certainty into the analysis of housing need and to reduce the amount of time used to discuss issues such as this at Local Plan or Section 78 inquiries, it does remove a key purpose of a SHMA; that is to understand the functioning of a housing market area. A proper analysis can indeed look at both official projections and alternative scenarios, but it should at this point be necessary for the Councils to seek to understand what is driving the trends and then form a view about what is appropriate in their own circumstances.


We note that the use of official projections or a 10-year trend is to be applied consistently across a HMA. This also potentially opens up a significant issue. It is quite probable in areas where there are multiple authorities in a HMA that both the official projections and 10-year trends show a similar level of population growth. However, it is also quite likely that the spatial distribution of this is quite different depending on the scenario used, thus making it difficult to assess (agree) OAN for individual local authority areas.


Generally, the LPEG methodology does not provide any way in which proper local knowledge and understanding can be used (simply saying to take the highest of two projections). This is a major weakness in areas where a full understanding would be of assistance. An example is that LPEG make it clear that Unattributable Population Change (UPC) should not be considered. Whilst as a general rule this is not unreasonable, it is the case that there are a number of areas where looking at wider factors (such as UPC) would be beneficial. This might include locations where one area has a population projection that is much higher than trend levels of population growth but another part of the HMA sees the opposite pattern. It really should be up to the analyst to investigate if this might be due to UPC and suggest alternatives as appropriate. Furthermore (still on the topic of UPC) it is the case that use of a 10-year migration trend will include a period where UPC is highly likely to be related to migration and so again it would be reasonable to investigate this, even if the ultimate decision is that UPC should not be included in projections. UPC impacts on population in both and upward and downward direction (equally) and so a common sense approach would be to at least think about the implications. To fail to do so might mean in some locations that housing need projections are wholly unrealistic in the local context.


Migration and Population Projections – Key Issue


  • The LPEG method double counts population (people cannot live in more than one place at the same time) and does not allow for local characteristics to be properly scrutinised.


Household Formation (Headship) Rates


The next part of the proposed analysis is for headship rates for the 25-44 population to be partially returned to the rates seen in the 2008-based CLG projections. This is only to be done where the rates from 2008 are higher than in 2012 although in reality it is unlikely that there are many (if any) areas where such an adjustment would not be made.


We would fundamentally disagree with an approach that automatically reverts formation rates to the midpoint between 2012- and 2008-based rates. As an initial point, it is unclear if the 2008-based rates are really robust for use given that the data underpinning these is now largely 15-years old (based on the 2001 Census).


However, the big problem with this approach is that it completely fails to recognise that part of the change in headship rates is due to changes in household structures (e.g. due to international migration and changes to the BME community). This change does not impact equally in all areas. For example, in major urban areas we have typically seen greater divergence between 2008- and 2012-based rates than in more rural locations; this is due to changing household structures rather than suppression. Hence to take the midpoint between rates will over correct in many (mainly urban) areas and under correct in other (likely to be the more rural) areas.


Clearly it is not appropriate to have a one size fits all approach to this topic and really any guidance should be advising as to how this issue should be considered and what potential options are open to the analyst where a suppression can be identified. This might for example include partial return to trend approaches which actually understand the underlying data.



Household Formation (Headship) Rates – Key Issue


  • The LPEG method is too simplistic, relies on outdated information and is insensitive to local characteristics.


 Vacancy Rates


Another part of the LPEG approach which has not been thought through is the allowance to add for vacant homes. The LPEG says:


‘To arrive at an estimate of the number of dwellings associated with the demographic starting point, an allowance should be added for the local rates of vacancy and second homes. This data is recorded by the Council Tax Base and presented in DCLG Live Tables, using data from the most recent year. The current rates should apply, except where the vacancy rate is above the national average, in which case plan makers should assume a reduction in that vacancy rate down to the national average to reflect the impact of measures to encourage bringing empty homes back into use’


This on the face of it does not seem to be an unreasonable suggestion. However, some caution should be exercised when using the CTR as this source may not fully capture the number and proportion of vacant homes in an area. This is because the CTR source depends on householders actually registering their home as vacant; in some cases, (for example where there is no discount for second homes) there is no incentive for a property to be recorded as vacant and hence this source will underestimate the proportion of homes empty at any point in time.


This can be seen if we were to compare the CTR vacancy rate with 2011 Census estimates. Typically, the CTR shows around 3% of homes as vacant, whereas the Census recorded a figure (for England) of 4.3%. Whilst this might not seem like a significant difference it is equivalent to about 300,000 homes which are likely to be vacant but not recorded as such on the CTR.


However, the bigger problem with the LPEG analysis is the complete lack of realism in terms of returning a vacancy rate back to the national average.


One example can be seen in the case of South Hams (which has a high proportion of vacant homes due to a high number of second/holiday homes). According to CTR records for 2015 some 10.8% of homes in the local authority were vacant; this compares with a national average of 3%.


According to the 2012-based CLG household projections there would be 37,688 households living in South Hams in 2015. Using a 10.8% vacancy allowance suggests that in 2015 there was a need for 41,758 homes (37,688 × 1.108) – note that the CTR actually records 43,275 dwellings providing further evidence that the CTR will underestimate vacant homes. According to the CLG projections, by 2035 there will be 41,556 households in the District. According to the LPEG report we should be returning the vacancy rate to the national average and therefore the number of homes required will be 42,803 (41,556 × 1.03). Hence we have the following perverse situation:


Household growth = 3,868 (41,556-37,688)

Dwellings required to meet this household growth = 1,045 (42,803-41,758)


Put simply the LPEG method will suggest that a household growth of 3,868 will only need 1,045 additional homes to be provided. This is clearly not sensible.


Vacancy Rates – Key Issue


  • The data source suggested by LPEG may be incomplete and the method to reduce rates in some areas will give rise to some illogical outputs.


Employment Trends


The recommendation of the LPEG report is that employment trends should not be used in the calculation of housing need. Whilst it is not stated in the report, it seems likely that this suggestion is due to major issues in the assessment of job-led housing need and a complete lack of consistency in approach taken in both understanding this link and how it should be translated into planned housing targets.


We disagree that economic growth should be excluded from the assessment of OAN although would suggest that better guidance is appropriate. The LPEG suggestion of excluding the link between jobs and homes seems to completely miss the important point of trying to ensure that job growth and housing are (as far as possible) located in the same (broad) area to ensure that we do not have unsustainable commuting patterns.


In fact, we think that the original version of the PPG was spot on with the wording in terms of economic growth bearing on the locations of housing. Unfortunately, it seems that the wording in the PPG was misinterpreted (by both local authorities and the development industry) to mean that a labour force shortage meant having more homes – without any consideration of the areas that might need fewer homes as a result of lower job growth. The PPG (as currently worded) is clear that the link between jobs and housing should have a bearing on where housing is provided and this is entirely logical and should not be changed.


Some of the wording used in the LPEG report with regard to employment trends is also concerning in terms of the understanding that has gone into the work. Firstly, the report suggests that other adjustments made to the OAN (such as market signals) are likely to respond to economic growth housing pressures. This is in effect saying that additional uplifts to housing numbers will mean more in-migration and higher population growth (and hence a bigger workforce). This suffers from the same general problem with the approach generally in that it is substantially double counting population by assuming that people can live in more than one area at the same time.


The PPG as currently worded is clear (if often misinterpreted) that when looking at economic growth, the plan maker should be looking at the balance between jobs and homes and if for example an area is projected to see strong job growth and weaker demographic growth then there is a case to think about a different spatial distribution of housing (for example taking housing from an area where demographic growth is projected to be strong but economic growth weaker).


There are probably a number of areas across the Country where a consideration of this spatial distribution is relevant and one in which we have worked is the Coventry/Warwickshire HMA where it is clear that demographic trends are very strong in Coventry but economic growth is much stronger in parts of Warwickshire (such as Warwick and Stratford-on-Avon). The LPEG approach will suggest that all the need for housing is in Coventry whereas a more sensible distribution would be for additional housing to be provided in other areas (but to ensure that the HMA-wide need is met).


For LPEG to completely remove the need to understand the link between jobs and homes means that only a partial understanding of a local situation will be able to be used in the determination of the need for housing.


The LPEG report does however say that a local authority can use employment estimates to arrive at a higher housing requirement for the purposes of plan making. This suggestion once again suffers from the problem that this will assume a greater level of population growth and the consequence that people will be double counted within the modelling. Such a suggestion can only be appropriate if there is a reduction in population growth (and housing need) in other areas.


The final suggestion of LPEG under the heading of employment trends is about the approach to use if a policy-on housing figure is to be derived. In this case they suggest that any modelling should use economic activity rates as set out in OBR documents. This suggestion is particularly illogical and suggests that limited thought has been given to this part of the analysis. Whilst the OBR rates exist, and can be used, it needs to be properly noted that they do not relate to local level economic forecasts. Put simply, if a Council wants to look at economic growth based on a forecast from one of the main forecasting houses (e.g. Oxford Economics, Cambridge Econometrics or Experian) then it is not appropriate to apply OBR rates.


It needs to be remembered that economic forecasts come with their own view about key issues (such as population growth, commuting patterns, double jobbing, economic activity/employment rates) and this information should be used to model any implications for housing. If the OBR rates must be used, then it will be necessary for any local level forecast to also include these in their own analysis; this would more than likely reduce the level of job growth that might be supported (rather than increase the housing need).


Overall, the LPEG approach to the link between jobs and housing is fundamentally flawed and will do nothing to assist in understanding where housing should be provided or to assist Councils in ensuring that strategies for housing and employment are ‘integrated’ as required by para 158 of the NPPF.


Employment Trends – Key Issue


  • The LPEG method removes a key part of the NPPF (to align housing and economic strategies) and is flawed in detail by recommending the use of data (OBR) which bears no relationship to economic forecasts.


Market Signals


The next key area of analysis in the LPEG report is around market signals and how plan makers should respond to ‘adverse’ circumstances. As with other parts of the LPEG report a fixed and standard approach is suggested.


As with other parts of the analysis it is clear that LPEG are seeking to provide certainty given that approaches to dealing with market signals have not been consistently applied across areas. However, as with other parts of the LPEG report there are significant doubts about whether such an approach is realistic or sensible.


The core part of the LPEG approach is to just look at two indicators (the price:income ratio and a rental affordability ratio). In principle we support the limiting of the data to be considered and furthermore think that the two variables chosen may be appropriate. We are concerned however that the analysis does not look at time series data which we consider would be a better indicator of how things are changing and would therefore provide a clearer indication of whether any intervention is required.


However, our big concern with the approach taken by LPEG is that the data should be used to include a standardised uplift to housing numbers (of up to 25%). We would consider that the suggested level of uplift (at the upper end) is too high given the adjustments already suggested (e.g. to migration trends and household formation). More fundamentally (and a recurring theme within the LPEG report) having an arbitrary uplift will be based on increasing the projected level of population and this will therefore introduce double counting within the modelling.


We would consider that the whole analysis of market signals is misplaced and fails to understand what the analysis is seeking to do. The correct approach as we see it would be to follow these steps:


a)     What do the market signals say (i.e. are they indicating some pressures in the housing market)?

b)     What has the impact been locally the market signals analysis?


It is this second point which is most crucial. Clearly, if the analysis identifies an issue with market signals but other evidence does not support this having had any local impact (for example in terms of household formation) then it is hard to argue that any uplift is required. We would consider that any adjustment as a result of market signals should focus on household formation rates and not just be a blanket uplift, this is to prevent the issue of double counting of population.


If following the market signals analysis (and an analysis of the impact) it is decided that there is a need to uplift further, then care would need to be taken not to introduce a further double count if there has already been some degree of uplift as a result of household formation rates (as discussed earlier). For this reason, it is most appropriate to treat market signals and household formation rates together (this would slightly simplify the OAN process).


Overall, the market signals suggestions, whilst welcome in terms of the simplification of variables is completely nonsensical in terms of the reaction.


Market Signals – Key Issue


  • The LPEG method double counts population (people cannot live in more than one place at the same time).


Affordable Housing Need


The final part of the LPEG report looks at affordable housing. At present there is no detailed methodology suggested and it is recognised that the ‘need’ for Starter Homes will also have to be addressed in guidance. However, the LPEG report does make a suggestion about how the housing number should be adjusted where the need for affordable housing is particularly acute.


In this case a blanket 10% uplift is suggested (and this is on top of uplifts for migration, household formation and market signals). As with other parts of the guidance it is not considered that this is a reasonable approach. Put simply, this uplift would add a further level of population growth and would therefore double count with population included in more than one place at the same time.


As with other suggestions this has not really been thought through. Perhaps more fundamentally with regard to affordable need, LPEG do not recognise that the link between affordable need and overall need is complex. In particular, a notable proportion of the need for affordable housing in many areas comes from existing households. These households have a need but it does not per se translate into a need for additional dwellings to be provided (this point is logically made in the PAS technical advice note of 2015).


Affordable Housing Need – Key Issue


  • The LPEG method fails to understand the link between affordable housing need and the overall need for housing.


A way forward?


It is our view that the LPEG report is entirely reasonable to want to provide some clarity; we are however equally of the view that the existing PPG is pretty good and just needs some clarification. The general stages of the PPG are well thought out and if followed sensibly should provide a reasonable basis for the need for housing against which planned housing targets can be understood. Our suggested approach is along the lines of:


a)     Migration and Population Projections


Issues with the SNPP are well established at a local level (particularly because trends are driven from a fairly short base period of the past 5-6 years). However, it is considered that these projections should be treated seriously as they link to national projections (which are not constrained by short-term trends). This consistency, and the fact that all local projections sum at a national level is a particularly appealing reason for their inclusion as part of an OAN calculation.


STAGE 1 - The SNPP should continue to be the start point for analysis


That said, it is recognised that there have been notable changes in migration patterns in many areas since about 2008 (linked to the recession) and therefore sensitivities should be carried out to look at longer-term trends. We note that the LPEG report suggests a 10-year trend, in reality it may be that trends back to say 2001 would be better as this covers a roughly equal period both pre- and post-recession.


However, the key to looking at sensitivities is that the assessed level of population growth should be able to go down as well as up (as long as at a national level the overall population growth is met). Reasons for changes to migration should also be recognised. For example, analysis should set out whether past population growth may have been impacted by supply (a point sensibly made in the current PPG) or if there are other reasons, such as a general reduction in movements from urban areas or changes in patterns of international migration. These sort of issues need to be understood if a sensitivity projection is to be preferred over the official projections.


STAGE 2 – sensitivity test alternative (long-term) migration scenarios and make adjustments where other evidence supports this as being reasonable (adjustments can be up as well as down – but must be evidenced)


Ideally, LPEG should provide a definitive view about which type of projections should be used (i.e. short- or long-term trends) and they should also look at instances where UPC might be a factor (note: the PBA comments about this are entirely correct).


b)     Household Formation (Headship) Rates


With household formation it is again important to understand why the trends have changed. For example, is this due to suppression in the housing market or other demographic factors (such as international migration). It is difficult to see that there is a one-size fits all solution to this problem and for analysis to be credible it has to understand the local situation (Census Table CT0424 for example highlights much higher household sizes where the household reference person was born outside of the UK and so international migration is likely to play a part in explaining why some areas have seen more significant shifts in household formation patterns).


Where there is evidence of suppression (which there will be in most areas) it would be reasonable to increase the household formation rates of either particular age groups or across the board – the extent of this uplift will depend on the reasons for the apparent past trends (and also how the projections are expected to change in the future). Given the clear overlap with household formation rates and uplifts for market signals it may be more prudent to consider both of these stages together.


STAGE 3 – uplift household formation rates where there is evidence of suppression. Any uplift should be proportional to the reasons for and scale of past suppression.


c)      Vacancy Rates


A vacancy rate should be added to the outputs of any household projection. However, it is unclear if the CTR is a good source or whether it is realistic to seek to lower the vacancy rate (particularly in areas where there are large numbers of second/holiday homes).


STAGE 4 – an evidence based judgment on second and vacant homes should be applied based on up to date local evidence


d)     Employment Trends


The economic growth and link to housing is arguably the most complex of the OAN issues. However, we believe that it is reasonable to continue to look at the link between jobs, population and housing to inform housing need. However, we are clear that such an analysis should be used to inform an understanding of the locations of new homes rather than to be used as a method of applying a blanket uplift to OAN. Additionally, where economic forecasts are being used, any assumptions should be based on the assumptions inherent in that model and not from an unrelated source (such as from the OBR).


STAGE 5 – local authorities should look at the link between jobs and housing using the full range of assumptions underpinning economic and demographic models. This analysis should be used to inform discussions about the relevant locations of housing so as to minimise commuting as much as is reasonable.


e)     Market Signals


Market signals is another area where there are difficulties. A limited number of market signals should be analysed (i.e. we agree with the LQ price and rent ratios), however, any adjustment as a result of this should be carefully considered. Where an uplift can reasonably be projected without impacting on overall population growth then there is no issue; where an uplift would imply increased levels of net in-migration then there is a problem of needing to consider population growth in other areas so as to avoid double counting. Any uplift is therefore best considered as potential further increases to household formation rates.


STAGE 6 – consider market signals and uplift housing need if necessary. Any uplift should be carefully modelled so as to not impact on levels of population growth projected in the area.


f)       Affordable Housing Need


The final part of the analysis is affordable housing. Clearly there will be a need to include new forms of housing such as Starter Homes. However, there does not seem to be any justification for increasing housing numbers due to levels of affordable need. The affordable housing question is really one of mix.


STAGE 7 – undertake an analysis of affordable housing need in line with guidance to provide a view about the mix of housing best suited to meeting this need (this should be done after the OAN is set).




Ultimately the LPEG need to answer one question: Are the Government wanting us to plan for a significant over-supply of housing or to plan to meet the need for housing? If they are seeking to over-provide housing, then the LPEG approach is arguably okay (but does not reflect need); if the real aim is to meet need then a rethink of the proposed method is required.



Household formation rates 2001-11 in Leicester and Melton (selected age groups)




Source: Derived from CLG data