Housing need, a fudge sandwich?

I like fudge. Gooey, sweet, caramel fudge. Some people don’t and that’s fine; it pulls out fillings, it gets caught in your teeth, some say it is just too sweet. But just like blu tack is the best thing to remove blu tack, fudge might be the best thing to deal with fudge.

What am I talking about? Well, we’re back to the perennial issue of identifying housing need, something I’ve been writing about from almost the start of this blog. Here I am calling for a more clear-cut way of calculating need, on the consultation to do exactly that based on a new methodology and here I am taking those to task who try and conflate the draft methodology with anything in the real world. My conclusion- yes it is a fudge but a fudge that provides a much higher level of certainty. With the fudge councils can go off and set local plans that can be enforceable and create plan led development rather than the alternative, which is untrammeled development.

Today the government has announced a new consultation because things haven’t exactly gone to plan. The methodology used by the government relied on two numbers. Firstly the household formation projections- which are made by the office for national statistics based on past trends. Secondly and more importantly the outcome they wanted to see, which had been created by a range of different papers and political debate.

It is important to understand this second number isn’t exactly scientifically derived, just what we as a country have in effect agreed upon as the need for new housebuilding. It went from “between 225,000 to 275,000 or more new homes a year” to the snappier “300,000 homes a year” last year.

So the equation created by civil servants sought to use the household formation figures to get to the conclusion they wanted to see. They achieved that last year by multiplying the household formation projections by another number worked out from housing affordability in the area. Oh, plus some coefficients to make it come out with around the right number. Seriously, here’s the text:

Screenshot 2018-10-26 at 3.00.40 PM

I didn’t mind this, I still don’t. I like fudge. Why? Because it gave certainty and clarity; planners could get on with planning. Really, without getting too maths-y what it meant was that the household projections and housing affordability became a way to divvy up the nearly 300,000 homes a year the government had somewhat arbitrarily decided were needed between different areas. The real politics was how that divvying up affected different areas, as I spent much of the first blog on the methodology looking at.

But now the household projections have altered, with a significant reduction compared to the last lot. There’s a couple of reasons for this, one is because people haven’t been forming new households as much in the last couple of years (the real change) and secondly because the ONS have changed the way they calculate bits of the statistic.

The equation cannot handle this change; it wasn’t designed to. It worked because it came out with the right answer in the first iteration, not because it was describing reality. This meant many areas would have seen massively different (and massively reduced) housing targets, something that isn’t in keeping with the general consensus (with some very vocal dissent) that an increase in housebuilding rates is required.

So here we are, with the news that there is a new consultation saying two important things:

  1. For now, the most recent household projections should be ignored, in favour of the previous ones. Anyone using the most up to date figures will be in serious trouble (ie. not able to adopt their preferred local plan).
  2. The government will, within roughly the next 18 months, come back with a different methodology to replace the current one, because to be honest there are lots of red faces trying to avoid the glare of ministers.

This is embarrassing and for anyone who thinks objectively assessed need should be um, objective. But I don’t, I think it should be a good enough guess that provides enough certainty for the real business of planning to get going. To put that another way, I don’t think every authoritiy will exactly hit their target, so we should probably stop worrying quite so much what the target is and work out how to try and accelerate appropriate housebuilding if that is what we agree should be hapenning. Worrying about numbers on a spreadsheet to the detriment of well planned communities is foolish. So let’s try to not get too worried about our fillings and enjoy our fudge whilst we can.

In time (before the 2018 household formation statistics come out) the government will have to consider a new way to fudge the figures. It would probably be best if they came up with something a little bit more robust. Until then, keep chewing…

Assessed need and its objectification

It must be Christmas because I’m talking about planning again! Not only that, but going back to the topics of one of my first posts– the attempts to estimate of how many houses we need.

Reading Inside Housing the other day I came across a slightly strange article title: ‘More than 30,000 new homes were in areas where they were not needed, according to government formula’. Is that true, I thought to myself and, frankly, what could it possibly mean? Follow me on a little circle and I’ll try and explain, hopefully trying to demystify quite a lot of planning-speak as we do so.

First off it is worth reminding ourselves where we are. For a longer explanation, feel free to look at my earlier post. Under the current rules, local authorities have to investigate their own housing need and convince an inspector that the methodology they have used to calculate housing need (and the answers that follow from this) are accurate. Some authorities convince inspectors, some don’t. There are very few hard and fast rules to this, other than bring as much evidence as you can and explain why you did or didn’t include everything you can think of. The total amount for the country is therefore an accumulation of what each local authority has decided.

The government are proposing a new methodology that is consistent across England and can be worked out fairly quickly and easily. Crucially, instead of accumulation, the government has effectively sought out a way to distribute a national figure for housing growth (between 225,000 and 275,000 a year, more on this below) and then worked out a methodology that achieves this and spreads the national figure over the country.

So the first and absolutely clunkingly obvious thing to point out is that these methodologies are different. They may try and measure the same thing, but they go about it in completely different ways and we shouldn’t be surprised if they come to different national and local conclusions. One seeks to try and make each local area right, probably with a bit of leeway and then accumulate them nationally to something possibly right-ish with lots of leeway. The other tries to take a national view and then spread it about the country, using a crude (but therefore easy to understand) measure of affordability to do so. It is consistent and easy to understand, but as a consequence of being crude, more likely to be wrong for each individual local authority area.

Is there one that is more right and one that is more wrong? Well, in terms of trying to work out how many households there will be in, say, 15 years time, there probably is. Indeed, you only need to look at the work of Andrew Lainton to see an impressive attempt to try and find an even better, consistent, relatively easy to understand methodology.

But even the most spreadsheet happy statistician would have to accept that all they can try to achieve is a good estimate. Frankly, we may only know which was more right when we get there and even then the outcome is likely to be predicated on the actions taken until that point (because creating homes can also create households!).

Let’s put that another way- the numbers the government are using are a little bit fudgey. To begin with, the 225,000 to 275,000 range is quite large; 50,000 homes a year difference between them! The figures come from February’s white paper, with a footnote stating where these numbers come from. This includes the 13 year old Barker Report, which even Kate Barker herself has incredulously commented upon it still being used.

I’m not saying these numbers are wrong, I’m saying there is a 22% difference between 225,000 and 275,000. But what matters isn’t that the number is exactly right, but that local authorities have an idea about the housing need in their area that is seen as required and are actively doing something to meet it in a reasonable and plan-led way.

I’d much rather a good but not perfect guess now, rather than an exact answer some time in the future. And yes, that goes for distribution across areas as well as well as for the national figure.

The alternative approach, the one we have had for the last few years, is to have argument on top of argument about what the actual number, down to the last digit, should be. Local plans have been kept in a form of hiatus for years as these arguments progress. What this has meant, as I’ve detailed in my previous post, isn’t no development, but development where housebuilders want (apart from the green belt) at a rate that suits them.

But what about these 30,000 homes that “weren’t needed”? What the report goes on to say is that this is the difference between the additions to housing stock in the last year and what the same local authorities would have as their targets under the proposed new methodology. Hopefully, you’ll be able to see where the mistake (known or otherwise) is there.

Firstly, the new methodology hasn’t been implemented yet (the government are looking at the consultation responses) and even if they were almost all local authorities haven’t had enough time to update their plans based on the new proposals. Secondly, these were almost certainly homes that were needed in one sense or another not least because the housebuilders, who effectively control the market for new completions, knew they could sell them. Thirdly, the targets are really minimums, with a reasonable amount of over-supply having the potential to offset other years that might be leaner. An area that only just meets its target every year is in for a shock in a low year!

So I can’t quite see what the issue is with the fact that in some authorities some homes are being built. There is much to be critical of the government for in strategic planning. Most notably, making local authorities wholly responsible for builders failing to deliver new homes whilst denying (or at least kicking the can down the road of giving) them the powers to actually do anything about this. Such powers inevitably include letting councils actually build new social homes for rent at a scale that would help alleviate some pressure.

In essence the long discussions about housing numbers have got in the way of delivering homes and taken up a lot of conversation time that could have been spent looking at what could actually help deliver homes, particularly affordable homes (for sale or rent), where they are needed most.

But hopefully what I’ve gone some way to showing is that whilst assessments of need are more or less arbitrary -and the government’s proposals are at the “more arbitrary” end of that- what really matters is that there is a clear and achievable challenge for everyone involved in housing supply to meet and time and space to come to real and actual ways to achieve them. The alternative is essentially a parlour game, where anyone with a spreadsheet and a set of range calculations can have their two pennies.

I’m happy to take part in that game, but would also like to see some decent homes built at the right prices in the right places first. If setting a clear figure and empowering people to get out and build according to a plan can achieve that then let’s get on and do it.