The standardised approach to calculating housing need recently published by the Government is a step in the right direction towards delivering homes where they are most needed and supporting economic growth. However, it also demonstrates how great the challenge is to deliver the required number of homes. In the most unaffordable locations, housing delivery needs to more than double to meet need.

A more streamlined approach is to be welcomed. Yet, the proposed 40% cap on uplift above existing plan targets reduces the impact of the new method in the areas where an increase in homes is most needed. The effect is an ongoing under-provision of homes in the most unaffordable areas, most notably London.

The impact of the new approach will also be limited if it is not accompanied by a strengthened requirement for housing need to be accommodated elsewhere if a local authority cannot allocate enough land. At present, there is no mechanism for London’s unmet housing need to be allocated to connected markets.

^{Source: Savills Research,  DCLG}

The impact on land values

If the proposed method is implemented, it will result in higher land supply across the south east. The consequences need to be faced by both landowner and policymaker.

For the greenfield landowner, this may require realigning expectations on the value of land as a consequence of lower new home values. But that value still needs to be sufficient to persuade the landowner to sell.

For the policymaker, it means recognising that lower new home values may result in less land value to be captured through CIL and section 106. We will need other sources of funding for infrastructure and affordable housing. This will be particularly important around London, where overspill will have to be accommodated beyond the green belt.

It gets more complex in an urban setting where land values for other uses compete most directly with residential land values. Industrial land value in parts of outer London, for example, is outcompeting residential. The price to secure the land for new homes will place a lower limit on pricing and constrain the rate at which they are likely to be sold. New settlements have the advantage that there is no prior expectation for land value. They can also be treated differently for section 106 and CIL. More than 25,000 housing starts are expected in garden towns and villages by 2020.