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The most headline- grabbing change in the revised National Planning Policy Framework (NPPF) has been the proposed Standard Method for calculating Local Housing Need, which will form the basis for Local Plan making.
Applied nationally, the revised method equates to 371,541 dwellings per annum, which is an uplift of 21% on the number derived from the previous method, and would see over 75% of local planning authorities (LPAs) having to plan for a higher housing requirement than they are presently.
However, even if the proposed new method is introduced by the end of this year, it is unlikely to result in an immediate step change in land supply or the number of homes being built. Instead, it will take at least five years for local plan targets to increase to exceed the government’s aspiration of 300,000 new homes per year.
Plan making
LPAs with plans that are less than five years old will not have to use the new proposed method until their current plan has expired. There are currently 84 LPAs (28%) in this position. Around a quarter will become out of date in 2025, but by 2028 there will still be at least 30 LPAs with up to date plans that use housing targets derived from the previous Standard Method. This has knock-on implications for the number of sites these LPAs will have to identify in their 5-year housing land supply, and the standard that they will be held to in the Housing Delivery Test.
Having two parallel systems contributing to the housing need figures is likely to last even longer due to the transitional arrangements for LPAs on the verge of adopting plans. There are currently 40 LPAs at examination, and a further 16 at Regulation 19 stage, with realistic prospects of submitting for examination before the revised NPPF is introduced.
These local authorities will have their plans examined under the previous version of the NPPF, with their housing targets assessed against the current Standard Method calculations. These plans have combined emerging targets of 48,437 homes per year, but their annual housing need under the new Standard Method would be over 82,000 homes.
Even if LPAs cannot reach the examination stage before the revised NPPF is introduced, there is potential to avoid the higher requirements; if they have reached Regulation 19 stage with a target that is within 200 homes per year of the new Standard Method, they can continue to examination under the previous version of the NPPF using their existing housing requirement. As a consequence, even by the end of the current parliament, there will still be LPAs that will not have adopted local plans using the new Standard Method.
Market impact
These varied provisions for transitions mean that we expect the combined total of local plan annual targets will remain around 250,000-260,000 homes until 2027, and will only exceed the government’s delivery target of 300,000 from the end of 2029.
As a consequence, there won’t be a sudden increase in land supply – although there is a window of opportunity will be open for developers to bring sites forward in the c. 100 LPAs that would lose the ability to demonstrate a 5 year housing land supply using the new Standard Method figures.
But housebuilders should not expect to see a rush of new sites coming to the market, or any significant changes in land values as a result. The most likely outcome is a gradual increase in the supply of development land, and a gentle moderation of land value growth, mimicking the conditions of 2013-2016 when the original NPPF was introduced.
Further information
Contact Emily Williams
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