APPENDIX

Dear Mike

REVIEW OF REGIONAL PLANNING GUIDANCE FOR THE SOUTH EAST (RPG9)/

PREPARATION OF REGIONAL SPATIAL STRATEGY (RSS) - GOVERNMENT'S EXPECTATIONS

At both the Housing and Strategy Advisory Groups, GOSE was asked to clarify Government's expectations of the Assembly particularly regarding the housing content of the comprehensive RPG9 review. We welcome the progress your Assembly is making both on the partial reviews of RPG9 and also on launching the preparation of a new Regional Spatial Strategy (RSS). The conferences in July and September, which launched the process, were well received. We are now pleased to provide you with further advice, specifically with respect to timing and the housing content of RSS.

1. Timing of the review

You have provided a timetable whereby the Assembly would submit draft RSS to the Secretary of State in early summer 2005. I understand that you are still elaborating a more detailed work programme with colleagues. This will be important both for the individual stakeholders in the region and indeed for ourselves to help us advise Ministers.

In the meantime, I refer to our letter of 20^th June and confirm that the points we made on the outline timetable still stand. At the same time I am aware that you have written to the Office of the Deputy Prime Minister (ODPM) about the timing of the 2001 Census results and projections. You point out that delays will seriously impact on your ability to produce a draft RSS within the proposed timescale notwithstanding the additional work already being undertaken by the Assembly. I appreciate your warning and suggest a more detailed discussion including ODPM officials about the evidence base that can realistically be expected to inform the new RSS. For example, you may already be aware that ODPM intend to publish interim household projections at the regional level next month.

2. Housing content of new RSS

We acknowledge the valuable work - for example, through the Housing Advisory Group - on developing the methodology for generating and testing spatial development options taking account of national guidance. As a party to your advisory groups, we have previously advised you verbally of our expectation that the Assembly will explore a number of spatial options in line with guidance in PPG11 (Planning Policy Guidance Note 11 on Regional Planning). We hope that the following points will assist you in developing these options.

(a) RPG9 as the starting point

You will be aware of a number of references from the preparation and interpretation of the current RPG9, which advise on the scale of future growth in the South East. In particular, we point to the report of the independent Panel who examined the draft RPG9 in 1999, the final RPG9 (March 2001) and more recently the Deputy Prime Minister's reference to the potential for additional growth in his Sustainable Communities Plan (February 2003).

The following table summarises relative scales of growth inferred by these three sources in terms of percentage increases on rates of provision already planned.

As you know, policies H1 and H3 in the current RPG9 set out the Secretary of State's expectation that the regional level and distribution of housing provision would be reviewed before 2006 in the light of monitoring, the findings of urban capacity studies and studies of potential growth areas. Studies of potential additional provision in growth areas helped to inform the Sustainable Communities Plan. The partial reviews of RPG9 for the growth areas - Ashford and Milton Keynes and South Midlands - and the position statement for Thames Gateway on which you are currently working with support from consultants and ODPM, will help to update policy up to 2016. You will also need to consider the contributions of these and possibly other growth areas in the longer term.

(b) Housing market volatility and early lessons from the Barker Review

The Chancellor of the Exchequer stated in his 2003 budget report "Meeting the Productivity Challenge" paragraph 3.126 that the Government will

"require the Regional Planning Bodies to consider the case for additional growth in the longer term when preparing new Regional Spatial Strategies, and to take account of volatility in the housing market and the need to promote macro-economic stability as part of delivering sustainable development." (Text shown in bold for emphasis).

You will recall that out of the concern about volatility in the housing market, the Chancellor and the Deputy Prime Minister set up a review under Kate Barker. The interim report of that review, `Review of Housing Supply' (December 2003), provides detailed analysis of housing supply issues. The report states that from an economic perspective, the UK would be better off with more houses. In its Executive Summary, the report highlights three different approaches to measuring the housing supply shortfall nationally:

· Based on demographic changes. The shortfall for England is estimated at 39,000 dwellings annually compared with current build rates. This roughly equates to a 28% increase on current completion rates or a 15% increase on planned rates. In addition, the `backlog' is estimated to amount to around 450,000 households without self contained dwellings.

· Based on keeping affordability for new households in line with that in the 1980's. The shortfall for England is estimated at between 93,000 and 146,000 homes per annum, which could equate to between 60% and 94% increase on planned rates of housebuilding.

· Based on reducing the long-term trend in house prices to 1.1% or zero real growth. The UK-wide shortfall is estimated at 145,000 or 240,000 dwellings annually.

The other important point made in the report, is that supply side solutions alone will not address the problems. Indeed, house prices are not always driven by supply in absolute terms or entry level prices. Another key dimension is how well the composition of the housing stock matches households' needs. Therefore, the mix of type and size of housing is also a crucial factor.

(c) Emerging regional evidence base

We appreciate the useful work, which your Assembly is undertaking, for example, in updating the 1996 based household projections in advance of new national household projections prepared on the basis of the 2001 Census. In doing so you will wish to take account of the interim household projections which ODPM are due to publish next month on the basis of the 2001 Census. This work, including the information on the changing composition of households over time, will necessarily form part of your evidence base.

Among the other factors which should form part of your evidence base in assessing the overall need for additional dwellings in the region are regional economic needs, the need to provide wider housing opportunity and choice, taking account, inter alia, of the condition of the existing housing stock, evidence on any existing imbalance between supply and demand and housing market volatility.

We will wish to work with you on the evidence base, which will also be pertinent for future versions of the Regional Housing Strategy.

(c) Aviation White Paper

The Department for Transport's Aviation White Paper, `The Future of Air Transport' (December 2003) proposes two new runways in the wider South East in the period up to 2030 at Stansted and Heathrow. Land should be safeguarded for a new wide-spaced runway at Gatwick after 2019 in case the conditions attached to the construction of a third Heathrow runway, cannot be met. Therefore, as part of your Assembly's consideration of the distribution of housing, you will wish to explore the possible significance of an additional runway at Heathrow as well as the possibility of an additional runway at Gatwick post 2019.

(d) Conclusions

In conclusion, we expect the Assembly to explore a number of options in line with guidance in PPG11 (Planning Policy Guidance Note 11 on Regional Planning). In developing alternative spatial options, we would expect the Assembly to test alternative scenarios of increased scales and distribution of regional growth, taking all of the above information sources and other relevant information - such as that derived from urban capacity studies and Strategic Environmental Assessment - into account.

In order to provide sufficient analytical rigour in the testing of the possible alternative scenarios, we would expect the Assembly to develop scenarios starting from the reference in RPG9 policy H3 and paragraph 8.3, and incorporating higher growth scenarios derived from the sources quoted above. In developing higher growth scenarios we would ask the Assembly to pay particular attention to the need to address housing affordability, which regional partners agree is a key priority for the South East.

At the same time, there is broad agreement, reinforced by the interim findings of the Barker review, of the need for an approach which considers all aspects of housing, not merely the total numbers of dwellings. We, therefore, expect the Assembly to investigate and devise policy to enable a better match between households' needs and the mix of type, size and quality of housing to be provided over the next 20+ years.

We hope this advice is helpful and will be pleased to advise you further.

Yours sincerely

Colin Byrne

8637Appdx