Comment

Retaining the 5YR Housing Land Supply Test: The insurance policy we can’t do without?

Following the publication of the Housing White Paper consultation earlier this month, Senior Planner, Jonathan Dodd explores the proposal to abolish the need to demonstrate a five year supply of land and retain the Housing Delivery Test as the trigger of the presumption in favour of sustainable development.

The argument presented at paragraph 2.27, that the Government’s proposed approach (setting housing need and then zoning) would negate the need to demonstrate a five year supply, is unrealistic. In our view, it is vital to retain a forward looking policy test on housing supply, at least until the new system has shown itself to be capable. In many ways, the five year housing land supply test is the insurance policy that is essential to ensuring that housing delivery is not sidestepped. Without it, the system loses its bite.

How can plan makers determine whether there is land sufficient to meet the needs of an area without a housing trajectory? It is a non-starter to attempt this exercise without making assumptions on the lead in time to, and delivery rate of, new homes. For example, the zoning of an area for ‘growth’ may have total capacity of 6,000 new homes, however may only be capable of delivering 2,000 in the next 15 years.

It will therefore be essential to make assumptions on housing delivery rates at the plan preparation stage to ensure there is sufficient land to meet the needs of an area over a defined period.

The assumptions in the housing trajectory are then monitored and held to account, and if it appears that the overall rates of delivery in the area are falling below what is sufficient to meet identified needs (to extend the example above, if it appears that only 1,500 homes will now come forward in the plan period due to a delay with essential infrastructure), there is a policy consequence.

The White Paper acknowledges that there is a need for a consequence if delivery rates are below a sufficient pace (the presumption in favour of sustainable development). Abolishing five year housing land supply will in many cases unnecessarily delay the required policy response to bring forward further sites to meet needs.

Housing Delivery Test (HDT) – a reactive approach

The requirement to create a robust housing trajectory and demonstrate a five year supply is a proactive measure. It is preventative medicine. The HDT, on the other hand, is reactive.

The HDT is proposed as the trigger of the presumption, however given this is backward looking in nature, it will take time (years) to have the policy response even triggered, let alone see the effects in supply of sites. This is not aligned with the immediate imperative to ‘build, build, build’.

Now turning to the HDT, we consider the system is being set up for an unnecessarily delayed, but very significant shock. There are two key variables which will cause the HDT to have a powerful bite; the new housing need methodology and COVID-19.

Scenario testing the HDT

We have scenario tested future HDT results and assumed similar transitional arrangements for implementation of the housing delivery test as to when it was launched. These arrangements took the approach of assuming a baseline level of need to begin with (similar to what was/is currently being planned for) and applying the new housing need figures initially in limited years of the test only, which rolled forward until the new level of need was considered in every year of the test.

In the various scenarios which have tested alternative transitional arrangements, bringing in significantly higher housing requirements arising from the new proposed methodology (in many cases in the South of England) quickly results (usually within two years) in a substantially worse position than currently seen and wide enforcement of the most serious of consequences of the HDT, the presumption in favour of sustainable development.

Further to this, given the HDT is backwards looking, it will be difficult to avoid the effects of COVID-19 on housing completion rates. With reports of circa 50% reductions in total completions figures this year, the impact on future HDT results will be enormous.

If the HDT is to include the new housing need figures on one hand, and COVID-19 impacted completions on the other, there is likely to be an extreme shift in the consequences of the test for many areas in England.

Five year supply allowed us to look forward and make proactive decisions to address emerging issues. The White Paper proposal to remove five year supply and instead rely on the Housing Delivery Test is a retrograde step and will promote a reactive culture when we should be focussing on promoting a preventative one. The focus should be on maintaining the benefits that it provides in ensuring housing delivery, until at least the reformed local plan preparatory process has had the opportunity to establish itself.

We encourage clients to engage in the White Paper consultation (open until 29 September). Please contact Jonathan Dodd, Tom Armfield or Jeff Richards with any queries in relation to Housing Delivery Test forecasting, or to responses to the MHCLG consultation.

27 August 2020