Missing Targets: the systemic failure to calculate affordable housing need

Local authorities in England systematically under-count the need for affordable homes. This under-counting is deliberate and serves to cover up their abysmal failure to tackle a crisis of affordability in housing.

The deliberate undercounting of affordable housing need is built into every stage of government planning practice guidance. From this guidance local authorities calculate the amount of new affordable homes required to be built each year for sale or rent.

‘Affordable’ housing is not necessarily affordable. It is merely discounted on market price and consists of new rental, purchase and part-ownership homes. This discounted housing may be built by housing associations or local authority housing companies, but half of the annual total is built by private developers as a condition of securing planning permission. The government instructs local authorities to be ‘realistic’ about the amount of affordable housing they can secure from private developers. They are told not to set targets that the private sector might find too demanding.

That is why:

  • Only households registered on council waiting lists are included
  • Overcrowded households in social housing are not counted
  • All those living in inadequate housing are not included
  • Private renting households are excluded despite not being able to afford the rent
  • New households falling into need have to be homeless before they are counted
  • Affordable homes that have not yet been (and may never be) built are counted as available for rehousing
  • Planning quotas for affordable housing have no connection to the total amount of need
  • There is no requirement on local authorities to ensure the delivery of all affordable housing required

Local planning authorities are tasked with carrying out an assessment of affordable housing need. They are told how to carry out this assessment in statutory Planning Practice guidance (MHCLG, 2021). Current guidance is a streamlined version of the 2007 Strategic Housing Market Assessments: Practice Guidance, Version 2 (DCLG, 2007) and is set out in the table below.

Stage OneCurrent Unmet (gross) Need for affordable housing
1.1Homeless households and those in temporary accommodation
1.2Overcrowding and Concealed households
1.3Existing affordable housing tenants in need (i.e. currently housed in unsuitable dwellings)
1.4Households in other tenures in need
1.5Total Current Unmet Need (gross) 1.1+1.2+1.3+1.4
Stage TwoFuture Need
2.1New household formation (gross per year)
2.2New households unable to buy or rent in the market
2.3Existing households falling into need
2.4Total Future Need (gross per year) (2.1 x 2.2) + 2.3
Stage ThreeAffordable Housing Supply
3.1Affordable homes occupied by households in need
3.2Surplus affordable stock
3.3Committed supply of new affordable housing
3.4Total affordable stock available 3.1+3.2+3.3
3.5Annual supply of affordable re-lets or re-sale
Stage FourEstimate of net annual housing need
4.11.5 (current unmet need) – 3.4 (total available stock) = net current need
4.2Convert the net figure derived into an annual flow for plan period
4.32.4 (total future need) + 4.2 (annual flow of unmet need)
4.5= Total Annual Flow of future and current need
4.64.5 (total annual need) – 3.5 (annual supply of affordable homes)
4.7= Net Annual Affordable Housing Need
Planning Practice Guidance (MHCLG, 2021) and Strategic Housing Market Assessments: Practice Guidance,
Version 2 (DCLG, 2007)

The first stage in the assessment is to calculate the backlog of affordable housing need. This is a count of the number of homeless households, those in temporary accommodation, overcrowded and concealed households, and those living in unsuitable housing who cannot afford to move. There is a current backlog of four million households in affordable housing need in England. Much of this backlog is excluded from the calculations, leaving the scale of affordability problems significantly under-counted in housing policy.

Overcrowded households and those living in insecure and inadequate housing are excluded from the total calculation of affordable housing need. That’s because only the need for net additional housing is counted. Anyone already housed is not included as needing a new affordable home – however unaffordable and however bad their housing conditions. They are deducted from the total calculation on the grounds that they would free up a home if they were rehoused. That means they never get rehoused.

The backlog of current need is highest in the social housing sector, where the quality of homes has deteriorated because of decades of under-investment, and where the scarcity of homes leaves transfers to more suitable accommodation difficult to obtain. Despite this backlog, households in need in the affordable housing sector will not be included in the total calculation of affordable housing need. The guidance is unambiguous, and in stage 3 of the assessment, local authorities are instructed to subtract “the number of affordable dwellings that are going to be vacated by current occupiers” from the total calculation of need. Households in current need are effectively netted off against the homes they would vacate if they were rehoused; but they cannot be rehoused unless new affordable supply is provided.

Also mostly excluded are households in the private rented sector even if their rent is unaffordable and not covered by housing benefit. Hardly anyone living in private housing is ever counted anyway, because it is assumed that all households in affordable housing need will be registered on local authority housing registers or waiting lists. Housing waiting lists are a very unreliable source of information. To be listed on a local housing register, households must meet specific conditions and to have referred themselves as applicants for affordable housing. Registers can be closed to new applicants and the planning practice guidance in 2007 made clear they were “unlikely to be comprehensive”, but it is rare that alternative sources of data are used.

After calculating the backlog of need, the next step in the assessment of affordable housing need is to predict the number of new households unable to afford to buy or rent at market prices. Local authorities already use a government-mandated formula to predict the number of newly forming households. This formula is used to set overall housing targets and it tells local planning authorities the amount of land they need to allocate for housebuilding. Around 80% of new homes are built by speculative housebuilders and sold to prospective homebuyers so most of the land allocated for housebuilding goes to the private market and results in full-price homes for sale. But not all newly forming households are able to afford market prices.

Using the assessment of affordable housing need, it should be possible for local planning authorities to identify the specific number of new homes that are required to be affordable, and to allocate land for these affordable homes, rather than for full-price housing. This, however, is totally impossible. Firstly, the overall housing targets are calculated using a completely different method from the assessment of affordable housing need – and you can’t compare the two figures. Secondly, planning policy does not allow land to be allocated for a specific type of housing – so you can’t allocate a site just for affordable housing. This means that the projected number of newly forming households who will not be able to afford market housing are counted twice – once in the overall housing target for market housing, and again in the assessment of affordable housing need.

Many new households are not able to afford market prices but they are counted in the target for market housing anyway. There are other households who ‘fall into need’, as planning practice guidance calls it – these are new households who start off in market housing but find they can no longer afford it. Again, it should be possible to combine the calculations of affordable need with the forecasts of household growth to allocate a specific number of affordable homes for new households who fall into need. But the guidance on how to calculate households who fall into need does not even try to do this. Instead, it tells local authorities to count the number of families rehoused as statutory homeless in the previous five year period, and use this as a prediction of future need. Even more bizarre is the instruction in the 2007 guidance, which is still followed, that only households rehoused within a year should be counted. There is no explanation or justification for this. Falling into need is not the same as being homeless and owed a duty of rehousing. And only a very small number of statutory homeless households get rehoused in a year.

In the final stage of assessment, local authorities are required to estimate the future amount of affordable housing that will become available annually for resale or relet and subtract it from the total number of households in need. Local authorities are also instructed to determine the likely supply of new affordable homes to be provided as a percentage of market-led developments. They count affordable homes that have not yet been built, all those with planning permission or in a pipeline of allocated sites, or likely to be built in the lifetime of the plan period of 15-30 years, assuming that all permissions will be built out and planning obligations met in full.  The available and anticipated stock of affordable homes is then subtracted from the gross housing need. This calculation deducts from the total backlog of need all the affordable homes likely to become vacant over the plan period, and all potential affordable homes that may be built during the plan period. This calculation effectively nullifies all households in current need. The possible future supply of affordable homes is subtracted from the total amount of households in need. Anyone who might conceivably be rehoused in the future is not counted in the present. And, since they are not included in the calculation of affordable housing need, they can never be rehoused.

A net total of affordable housing need is obtained by subtracting the available and anticipated stock of affordable homes from gross housing need. The net figure is then converted into an annual flow to provide the evidence base for planning obligations requiring affordable housing contributions from developers. Planning obligations seldom specify a required percentage of affordable housing greater than 35 per cent (excepting the Greater London Authority) no matter how high the total affordable housing need may be. No rationale is provided for seeking a percentage instead of the total requirement of affordable homes.  As it is, the percentage negotiated in planning obligations has no connection to the quantum of need and there is no requirement on local authorities to ensure the delivery of all affordable housing required.

When the percentage of affordable homes provided by developers is insufficient to address need, the only action open to local authorities is to apply an uplift to the overall target for market housing. “An increase in the total housing requirement included in the plan may need to be considered where it could help deliver the required number of affordable homes,” (MHCLG, 2021: 8). In effect, this means allocating more land to developers for expensive homes for sale in the hope that the increase in profits captured from house prices will be enough to encourage developers to build a small percentage of homes to be rented or sold at a discount. The cost of providing additional affordable homes is paid by increasingly unaffordable house prices.

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