Research article

Will revisions speed up delivery of new homes?

National policy

Revisions to the NPPF should produce a system that better responds to market signals, but changes to the plan-making process could have implications for delivery

The ultimate test of the revisions to the NPPF will be whether they lead to higher levels of housebuilding to reach the Government’s target of 300,000 new homes a year.

To increase delivery, the planning system needs a greater focus on delivering consents in areas of highest demand, to make full use of untapped market capacity.

That was the lesson from our 2017 report, Planning to Solve the Housing Crisis, in which we demonstrated that these areas accounted for almost 40% of housing need, but only 20% of residential consents in 2016.

The revisions to the NPPF go some way towards meeting this goal. The new standard methodology of calculating housing need allocates almost 40% of housing need to the areas in the highest quintile of affordability (see the chart below). This should lead to an increase in allocated sites and, accordingly, planning consents in the areas of greatest need. However, the impact will be tempered over the first five years of its application as the uplift from existing targets is capped. The question then becomes whether an increase in consents in high-demand areas will lead to an increase in housebuilding.

Redressing the balance

FIGURE 1 | Redressing the balance | Revisions should result in more consents for housing in the least affordable areas
Source: Savills using ONS, MHCLG, Glenigan | Note: See Policy response: Planning for the right homes in the right places

The Housing Delivery Test is a positive step in making local authorities more accountable for meeting the targets set in local plans. However, the effectiveness of the Test will be muted, particularly in the early years, due to its phased implementation. Our assessment of the impact on individual local authorities in 2018 and 2019 can be found on All bark, no bite?

At a national level, it is unlikely that the Test will drive the delivery of 300,000 homes per year. The presumption in favour of sustainable development will only apply when local authorities fail to deliver more than 75% of their housing target in 2021. As the standard methodology currently totals 266,000 homes nationally, this could simply result in the present level of around 200,000 homes delivered each year being maintained. There needs to be additional measures such as local Growth Deals in order for housebuilding to reach 300,000 homes a year.

At a national level, it is unlikely that the Test will drive the delivery of 300,000 homes per year

Savills Research

Need for joined up strategies

Planning policy is a key part of delivering more housing, but it doesn’t exist in a vacuum. The local economy should also be a key consideration. The Government’s Industrial Strategy, published in November 2017, national and local infrastructure investment and the local growth funding schemes, announced in the Autumn 2017 Budget, all have the potential to expand market capacity by driving job growth or connecting new areas to existing employment centres.

But in the revised NPPF, the new standard methodology is based solely on household projections and housing affordability. The NPPF states that ‘significant weight should be placed on the need to support economic growth and productivity’, but no specific guidance is provided to how this should be achieved. The draft NPPG states that local authorities ‘may’ choose to apply an uplift based on local industrial strategies or planned economic growth. There is no explicit requirement to assess at examination whether the housing target has sufficiently accounted for infrastructure investment or future employment growth. There is a continued risk, therefore, of local authorities adopting housing targets that do not keep pace with planned economic growth.

Of key importance is paragraph 36 of the revised NPPF, which sets out the requirements for testing at examination whether a plan is ‘sound’ or not. The wording is such that local plans could be found ‘sound’ where a local authority adopts a housing target in line or above the standard methodology figure, whether it supports the local economic strategy and responds to new infrastructure investment or not.

Missed opportunities

The NPPF revisions do identify the link between new infrastructure and housing, for example in relation to the recommendations of the National Infrastructure Commission and the requirement for strategic policies to take account of major new infrastructure when looking forward.

Exactly how this is achieved has yet to be determined, although precedents are beginning to emerge. The Oxford-Cambridge Corridor is the notable example, where the Government ambition is to deliver 1 million new homes by 2050. This target is 250,000 homes above the target that would be derived from the application of the standard methodology over the same period.

By seeking to simplify the calculation of housing need, the Government is at risk of missing the opportunity to position housing delivery as fundamental to supporting economic growth and boosting productivity, as well as properly accounting for the boost to housing markets derived from infrastructure investment.

Investing to support housing delivery

The Government is investing £5 billion to support housebuilding via the Housing Infrastructure Fund (HIF). The stated aim of the HIF is to enable the delivery of new homes in the areas of greatest demand, echoing the ambition of the NPPF to ensure that land for housing can come forward where it is most needed. But the distribution of the money does not align with the direction of the NPPF.

Housing Infrastructure Fund

FIGURE 2 | Housing Infrastructure Fund | Distribution of funding is not targeted at the areas of highest housing need
Source: MHCLG

Our analysis shows that, to date, HIF money has been distributed evenly across the country rather than weighted towards the areas with the highest housing demand. Only 40% of the funds distributed have been allocated to areas that account for 58% of all housing need. The number of new homes that will be accelerated or enabled by this investment is heavily weighted to more affordable areas, while only 15% will be delivered in the areas of highest housing need.

FIGURE 3 | Top: Distribution of homes unlocked by HIG | Bottom: Distribution of HIF funding
Source: MHCLG

Allocating funding to more affordable areas can serve a valuable function, such as facilitating urban regeneration or improving the quality of housing stock. However, it does not reflect the main aim of the Fund to unlock homes in the areas of greatest need. If funds continue to be allocated in this pattern, the Government will have missed a key tool that could be used to ensure that the greater number of consents that the NPPF aims to deliver in London and the wider South East actually feeds through to higher levels of housebuilding.

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