STRATEGIC PLANNING JOINT ADVISORY PANEL

Date: 10 March 2004 Item 8

Report by: The Hampshire Director of Environment, City Planning Officer and Southampton Executive Director of Development and Sustainability

Planning Future Housing Provision to 2026

Written by: Stuart Roberts, tel 01962 846782 email: [email protected]

Purpose and Summary:

The Government forecasts that the number of households in England will rise by over three million from 2001 to 2021 due mainly to more people living on their own and the growing elderly population. The UK's foremost demographic expert says there is also a backlog of households that have not been able to obtain housing; he calculates that 250,000 new homes per year are needed to house the backlog and future household formation, compared to the 150,000 per year actually built in the last decade.

Inadequate rates of housebuilding, especially of social housing, have created an affordability crisis; prices of `market housing' rising faster than incomes and a shortage of homes for rent by those on low incomes. These issues were highlighted in the interim report of the national review being undertaken by former CBI adviser Kate Barker, which postulates substantial increases in housebuilding in order to reduce house price inflation.

The new Regional Spatial Strategy (RSS) for the South East will set the amount of housebuilding to be provided for in Hampshire. Maintaining current rates of building up to 2026 would mean earmarking sites for another 58,000 dwellings (1,900 hectares) on greenfield land over and above that already provided for by the Hampshire Structure Plan. Higher housebuilding rates - as mooted in the Barker Review - would require land for up to 200,000 extra dwellings (6,700 hectares). Ways of accommodating this extra housing could include one or more of the following options: new Major Development Areas (MDAs); a new settlement; incremental expansion of existing Hampshire towns; development along public transport corridors; and higher densities.

Most of the new households will contain only one or two persons. This might mean an increased demand for smaller dwellings, although a recent Hampshire survey indicates that many small households prefer to occupy larger dwellings. Irrespective of dwelling size, the need for affordable and key worker housing is expected to increase over the next 20 years.

This report seeks only to initiate a debate on future housing provision in Hampshire; no decisions are needed at this stage.

RECOMMENDATION:

That the need to plan for a significant amount of new housing in Hampshire be noted.

1. Introduction

1.1 Providing a decent home for everyone who wants one is a hallmark of a civilised society. More housing will be needed in Hampshire over the coming 25 years to cater for a rising number of households. This is largely due to social factors, such as younger people aspiring to independence earlier in life, more people choosing to live on their own and elderly people living longer.

1.2 Some crucial decisions will need to be made over the coming 9 to 12 months on the amount, type and location of new housing which will be planned for in the RSS and any component sub-regional strategies. The Hampshire authorities will need to formulate a view on these matters so they can seek to influence strategy preparation in an informed, articulate way and then respond when consulted on the draft RSS. This report seeks to initiate discussion on the issues; It is a debate which is likely to continue within the Hampshire authorities and with partner organisations over the coming months.

2. Aims and Visions of Corporate and Community Strategies

2.1 This report supports the aims and visions of the three strategic planning authorities' corporate and community strategies by helping to ensure that sufficient sites for new homes are provided to meet the future needs of Hampshire people.

3. A Housing Crisis

3.1 There are three main reasons for household growth:

(i) people are living longer and in their own homes until later in life;

(ii) more single people of working age are living alone, either after divorce/separation or because they are not living with a partner until later in life; and

(iii) more people are coming from abroad, many of them bringing skills which are in short supply.

3.2 The growth in households shows sharp regional differences, with the highest rates in the South East, Greater London, the South West, and the East of England. In these four areas, the number of households rose by 138,000 each year from 1996 to 2000 compared to only 58,000 in the rest of England combined.

3.3 The number of households in England could rise by over three million between 2001 and 2021 according to latest Government projections. Although often described as an unprecedented increase, in fact it is no greater than the actual growth over the last 20 years.

3.4 In addition to new households forming over the coming years, demographic experts say there is a backlog of households which formed in past years but have not been able to obtain housing. This manifests itself in rapidly rising house prices, essential workers unable to afford a property in high-price areas, youngsters forced to live with parents or on a friend's sofa, families in temporary accommodation, and others homeless.

3.5 Alan Holmans, the foremost demographic expert, calculates that 250,000 new homes are needed every year in England to accommodate future household formation and to address the backlog. This contrasts with the average of 150,000 dwellings built each year over the last decade.

3.6 Housebuilding reached a post-war peak of around 400,000 per annum in the late 1960s. By 2000 it had slumped to under half that figure; the lowest level since 1924. At current rates of construction, a house built today would need to last for 1,200 years.

3.7 Since the 1960s, housebuilding by private developers has remained fairly steady at around 150,000 to 200,000 per year. The drop in total housebuilding has been due to a collapse in housebuilding for rent by social landlords (local authorities and housing associations). In recent years, only 20,000 new socially-rented homes have been built per annum compared to over 150,000 in the late 1960s.

3.8 Together these factors have created an affordable housing crisis; prices of 'market housing' rising faster than the incomes of those seeking to buy and a shortage of 'social housing' for those on lower incomes needing a home to rent.

3.9 In only ten of the 212 districts in southern England can someone earning £25,000 a year afford to buy a property. In the South East Region, the average price of a home is £125,000, requiring prospective purchasers to earn at least £40,000.

4. The 'Barker Review'

4.1 Kate Barker was appointed in 2003 by the Chancellor of the Exchequer and the Deputy Prime Minister to undertake an independent review of the issues affecting housing supply in the UK and the responsiveness of the housing market. The former CBI chief economic adviser published her interim report in December 2003. It considers the factors which might constrain housing supply. Her final report - due to be published in spring 2004 - will include options for Government action.

4.2 Her interim report found that historically, UK housing supply has been unresponsive to changes in price - as prices rose, housebuilding did not increase. Inadequate housebuilding constrains economic growth, damages the flexibility and performance of the UK economy, and reduces living standards for everyone. Regional price differentials also reduce labour mobility and hamper economic growth.

4.3 Too few houses and consequent higher house prices create affordability problems. According to the interim report, only 37% of new households in England could afford to buy a house in 2002, compared to 46% in the late 1980s. Households in England in temporary accommodation more than doubled between 1995 and 2003 from 46,000 to over 93,000. About 35% of first time buyers in London pay at least part of their deposit with a third party contribution, compared to 22% in the north and the midlands; increasing reliance on inheritance and donations drives a wedge between first time buyers who have access to wealth and those who do not.

4.4 The report sees the housebuilding industry as characterised by a reluctance to invest in brownfield development and low levels of innovation. Modern methods of construction are not well-established in England, where housebuilding techniques are very labour intensive. In order to maximise profits, the report says, many housebuilders control production rates and `trickle-out' no more than 100-200 houses per annum from a large development.

4.5 The report reaches no conclusion on how many houses should be built in future, but it sets out various options to help inform the debate. Some 39,000 additional houses a year are required simply to accommodate population growth and changing patterns of household formation in England. In recent years between 93,000 and 146,000 households per annum have been priced out of the housing market in England compared to affordability levels in the late 1980s. It estimates that an additional 145,000 homes per annum would be required in the UK to lower real house price inflation to the European average of 1.1%, and that an additional 240,000 houses per year would be needed in the UK to lower real house price inflation to zero.

5. Regional Spatial Strategy

5.1 The current Regional Planning Guidance (RPG) provides for 28,000 new homes per year across the South East, of which 6,030 are in Hampshire, including Portsmouth and Southampton. That document - published in March 2001 - states that these building rates are likely to be increased when the Guidance is reviewed.

5.2 The review of the Guidance is now being taken forward through the preparation of the inaugural RSS for the South East 'The South East Plan'. It will set out the amount of new housing to be planned for in the Region and in each District Council area up to 2026.

5.3 The Government Office for the South East (GOSE) has provided some advice to the Regional Assembly on the housing content of the South East Plan. GOSE expects the Assembly to develop scenarios up to 2026 which incorporate higher rates of housebuilding than in the current RPG. These would include scenarios based on:

(i) a 21% increase in housebuilding (based on the Sustainable Communities Plan);

(ii) a 40% to 42% increase (based on the report of the Panel which conducted the Public Examination of the now adopted RPG - the `Crow Report');

(iii) a 60% to 94% increase (based on keeping housing affordable) for new households in line with that in the 1980s; and

(iv) a 94% to 150% increase (based on reducing the long term trend in house prices to 1.1% or zero-rated real growth).

5.4 Other factors to be taken into account, GOSE says, are regional economic needs, pressures associated with airport expansion, condition of existing housing stock, existing imbalances between supply and demand, housing market volatility and how external changes could impact on the region. For instance, the enlargement of the European Union from May 2004 could result in a significant number of migrant workers moving to Britain.

5.5 The need to consider additional major growth areas, to complement Ashford and Milton Keynes, is also mentioned in the GOSE advice.

6. The Amount of New Housing in Hampshire

6.1 Although the Government, when it finalises the South East Plan, will determine the housebuilding rate to be planned for in each Hampshire District, the County Council will want to formulate its views in order to be able to influence the preparation of the Plan and then respond in an informed way to the ensuing consultation draft.

6.2 Interpreting the above into a Hampshire context yields some potential scenarios for the county, including Portsmouth and Southampton.

Projection Housing Provision Percentage Base supply Extra plots

2001-2026 increase (1) needed

Total Per on current rate

annum

Continue current RPG building rate 150,750 6,030 0 78,600 72,150

Government demographic projection

based on past trends (2) 183,750 7,350 22% 78,600 105,150

Building rate proposed by 211,250 8,450 40% 78,600 132,650

Crow Report (3)

Keeping affordability for new 292,500 11,700 94% 78,600 213,900

households in line with that in the

1980s.

Notes:

(1) Base supply comprises dwellings built since 2001, sites allocated/proposed in adopted/draft Local Plans and anticipated brownfield sites post 2011.

(2) 2001 to 2021 projection assumed to continue to 2026.

(3) Report of the Panel which conducted the Public Examination of the now adopted RPG.

6.3 The lowest of the projections highlights that looking long term to 2026, which is 15 years beyond the 2011 horizon of the Hampshire Structure Plan, requires the identification of considerable extra land for housebuilding even if the current building rate remains unchanged. Housebuilding since 2001, together with dwellings planned in adopted/draft Local Plan and additional brownfield sites which could be expected to become available up to 2026 could accommodate 78,600 dwellings - about half of the lowest projection. This would leave sites for another 72,000 dwellings to be found, 14,000 of which could be provided for on the Structure Plan's reserve housing sites, but that would still leave 58,000 to be accommodated on new greenfield sites (1,900 hectares at an average of 30 dwellings per hectare).

6.4 The higher projections would require even more; in the case of the highest projection 200,000 plots (6,700 hectares) over and above the baseline supply and reserve housing sites.

6.5 This may sound like a major incursion into the countryside, but to put it into context, the projections would increase the amount of Hampshire considered to be 'urban' by between 0.4% and 1.3%.

7. Options for Accommodating New Housing in Hampshire

7.1 Whatever the amount of new housing to 2026 which the RSS requires Hampshire to provide for, it could be accommodated through a blend of ways drawn from the following menu:

(i) a substantial increase in housing densities over and above what is already being achieved;

(ii) expanding the existing MDAs;

(iii) new MDAs;

(iv) a new settlement;

(v) incremental expansion of existing urban settlements; and

(vi) development along major existing or new public transport corridors.

8. Type of New Property

8.1 As explained in paragraph 3.1, the bulk of new housing is required for new households arising from people already living in an area, and not for immigration. This is borne out by the Hampshire, Portsmouth and Southampton Home Movers Survey 2002 which shows that two-thirds of properties changing hands are taken up by people already resident in Hampshire and 73% of the movers work within Hampshire.

8.2 Most moves were into three and four bedroom homes, with a substantial number being occupied by one and two person households. Nearly one-third of all single person households moved into a property with three or more bedrooms. Most movers were satisfied with their new home; the most common reason for dissatisfaction was home and/or garden being too small. Only 1% said their home was too big. This indicates that many small households are occupying larger properties out of choice and that they would be dissatisfied with smaller properties.

8.3 The projections show that between two thirds and three quarters of the new households will comprise only one person. Most will be aged 45 to 64, with the remainder evenly spread between the 16 to 44 and 65 plus age groups. The size of property that these households would wish to occupy is important for planning authorities to consider and it is not necessarily the case that they would all wish to occupy smaller properties.

8.4 It is uncertain whether this will mean greater demand for smaller (1 to 2 bedroom) properties. Single people may not be able to afford a larger property and may find a smaller home easier to maintain. Older singles and couples may want to `downsize' to release equity for their retirement, or in later years move into sheltered accommodation. Equally, there are strong arguments that single people/childless couples may want the extra space of a larger property and that people tend to buy to the limit of their finances, even if the greater space is not immediately needed. While elderly people could downsize, many may not want to.

9. Affordable Housing

9.1 The need for affordable and key worker housing is expected to increase over the next 20 years. It is unlikely that the present reliance on the provision of such dwellings on the back of private market housing developments will deliver the numbers of dwellings required. Other initiatives will therefore be necessary to meet this challenge.

9.2 Between 1999 and 2003 house prices in Hampshire rose by over 60%; in some districts prices doubled. For the first time buyer on an average wage there are no districts in Hampshire where the average-priced house is affordable, using the customary 3:1 mortgage to income ratio.

9.3 Local authority Housing Need Assessments show that around 35,000 households in Hampshire are in need of affordable housing. About 2,000 new affordable homes are being provided each year and this is not expected to rise over the next few years. At this rate it would take 18 years to place all those in housing need currently, let alone provide accommodation for future new households and people moving into the area.

10. Promoting the Debate

10.1 This report seeks to initiate the discussion of how much housing and what type of properties should be planned for in Hampshire looking to 2026. It does not seek any decision other than to note that even the lowest projection of housing requirements will require a significant amount of greenfield land to be ear-marked for housebuilding up to 2026. Any initial Member views are invited on the issues covered by this report.

Section 100 D - Local Government Act 1972 - background papers

The following documents disclose facts or matters on which this report, or an important part of it, is based and has been relied upon to a material extent in the preparation of this report.

NB the list excludes:

1.

Published works.

2.

Documents which disclose exempt or confidential information as defined in the Act.

TITLE

LOCATION

None.