How housing targets are stopping us building enough homes
The housing targets we set limit the amount of land that is available for development and the number of homes we build as a result.
Any plan needs an objective, and while town planning is about much more than just numbers, the number of new homes we need is a crucial starting point.
Targeting need
The government’s target of building 300,000 new homes each year isn’t a requirement of planning policy. Rather than a target, it might be better described as a political objective or an aspiration. Instead, the real housing target for England is the number of homes that local authorities are actually planning to deliver.
We have (in theory at least) a plan-led approach to development. Local authorities are tasked with preparing a local development plan to identify how many new homes are to be built over the next 15 years, and where those developments should be.
The current starting point for setting the housing target in their local plan is the government’s “standard method.” This calculation factors in both the expected rate of household growth and the affordability of homes to produce an estimate of housing need. The output of that calculation changes over time but currently produces a total housing need for England of 308,417 new homes.
However, local authorities might not be planning to meet this estimate of their housing need.
The most common reason for a council to be planning to deliver a different number of homes is that their current plan was produced before 2018, when the standard method was introduced. Two thirds of local authorities have plans which are older than that. Where plans pre-date the standard method, councils will have used their own, bespoke formula to estimate housing need. In some cases, where local plans are very old, the housing target might be taken from Regional Spatial Strategies - high-level development plans intended to coordinate development between individual local authorities everywhere apart from London which were scrapped in 2010 (and which we’ll come back to later).
Even up-to-date plans might be aiming to deliver fewer homes than would be suggested by the standard method1. That’s usually because the local authority believes that number of new homes simply won’t fit. In some councils the built-up area spreads beyond their administrative boundary making outward growth difficult, while others have physical constraints on development.
For example, Brighton and Hove’s local plan aims to meet just 44% of their standard method housing need. As the Inspector examining their Plan observed, this is because of “its location between the English Channel and the South Downs National Park, which limits the outward expansion of the City. Furthermore, there is a limited supply of vacant, derelict or underused brownfield sites within the urban area."
This nicely illustrates that local plan housing targets are not the same as housing need - targets are simply the number of homes that the council is aiming to see delivered.
Demanding supply
To ensure their plan is likely to result in the housing target being met, councils must make sure there is enough land to build on - known as the housing land supply.
The first and most obvious part of that process is to look at how many new homes already have planning permission but aren’t yet complete. We can be confident the majority of those will be built.
Next, councils will try to estimate how many homes are likely to be built within existing built-up areas but which don’t already have planning permission. Over the lifetime of a plan, new sites are bound to become unexpectedly available. These might be brownfield sites where the current use comes to an end, or where a landowner has pieced together a number of smaller ownerships. Although experience tells us this will happen, we don’t know exactly where the sites will be so they can’t be specifically allocated for development. This is sometimes known as “windfall development.”
Councils look at past trends and assess what land might be available in urban areas to predict how many homes they expect to be delivered on windfall sites.
Finally, councils identify new sites where they will allow development. These are often greenfield sites on the edge of existing settlements where, under previous local plans, development would not have been allowed. Sites like this “top up” the supply from other sources and are usually kept to the minimum needed to show the housing target will be met. Typically, there are far more suitable development sites than local authorities need to allocate in order to deliver their housing target.
For example, the Greater Manchester-wide development plan, Places for Everyone, is aiming to deliver 164,880 new homes but just 20,000 are on newly allocated sites, where development would not previously have been allowed. The rest – 88% of the total - are expected to be built on either sites which already have planning permission or on windfall sites within the urban area.
Even though we know that not every site identified in a local plan will come forward - things always change - there is no requirement to include any margin of error or buffer for sites not delivering. Some greenfield sites allocated for development in early drafts of Places for Everyone were removed from the final version simply because they were no longer needed to meet the housing target, despite the city region seeing some of the UK’s highest house price rises over the last decade.
If this process results in a housing land supply that is lower than the council’s estimated housing need, the housing target can be reduced to match the expected supply – just as Brighton did.
Floors that become ceilings
By the end of this process housing targets and housing land supply are closely aligned. That makes it very difficult for the supply of new homes to exceed the housing target in a local plan2. Even unexpected, windfall, development has already been taken into account. Unless something changes to cause the number of windfall sites to dramatically increase above what was expected when the plan was prepared, this sort of unexpected development doesn’t represent “extra” homes - it is actually essential to meeting the housing target in the first place.
The housing targets in local plans therefore act as an effective upper limit on the number of new homes that can be built. England’s real housing target - the number of new homes we are actually planning to build - isn’t the government’s political objective of 300,000 new homes, it is the aggregate housing target across all our local plans that results from this plan-making process.
Despite that figure being so important, it isn’t a number that the government monitors - so we to have to try to estimate it. A report produced by Lichfields, a planning consultancy, in April 2022 listed the adopted housing targets for almost every local council. Filling in the blanks and revising the figures where new plans - and therefore housing targets - have come into force since then produces a housing target for England of 233,010 homes per year. This is clearly well below the government’s political objective.
However, housing targets change over time and those changes take time to flow through into local plans. It is therefore informative to look at what England’s housing target has been in the recent past. We can do that by adding the housing targets from Regional Spatial Strategies at the point they were abolished to the target from the London Plan that was in force at the same time. That tells us that, roughly fifteen years ago, England’s annual housing target was 209,967 new homes.
Despite all the actual and proposed planning reforms over that time, the number of new homes we are planning to deliver in England each year has changed very little.
Figure 1: How housing targets in England have changed over time
Failing to deliver?
How do these targets compare with actual housing delivery? Data on the number of new homes built each year is poor, but the best source we have is the government’s data series on net additional dwellings3.
Unsurprisingly, housing delivery is volatile and responds to market conditions. The number of new homes built fell in the years after the financial crisis of 2007/8, for example. However, while delivery increased when market conditions were good, it struggled to rise much beyond 230,000 – the current aggregate housing target of all England’s local plans. That figure is effectively a cap on new build housing development, the planning system’s own cosmic speed limit.
Figure 2: Net additional dwellings per annum.
Planning to fail
Despite the government’s commitment to address the housing supply crisis, it appears that we are building exactly the number of homes we are planning to.
When local plans are aiming to deliver far fewer homes than the government wants, it should be no surprise that annual delivery is consistently far below their 300,000 aspiration.
The planning system might not build homes, but it does control the supply of land where development is allowed. When that land supply is so dependent on the housing target (and not housing need) and already takes into account “unexpected”, windfall developments, it is extremely difficult for the supply of new homes to exceed that target.
If we want to build more homes, we have to plan for it. We can’t just wish them into existence.
Councils are also allowed to set a housing target that is higher than the government’s assessment of their housing need provided they can justify that decision. However, this has happened only very rarely.
Housing targets might be exceeded for a short period, especially when plans include a large number of newly allocated sites. Such is the demand for new homes, these are often built early in the plan period rather than being spread evenly. While that is beneficial in the short term, it means that by the end of the plan period fewer new homes will be built each year as the supply of sites will have been used up. Many councils explicitly use past “over delivery” to argue for fewer new homes being built in future years.
This takes into account newly built homes as well as those delivered by conversions, for example, before deducting the number of homes which have been demolished. This is similar to how the housing target in local plans is structured.