Contact: Stuart Roberts, ext 6782 email: [email protected]

1. Summary

1.1 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. To provide for these, and a backlog of households who have not been able to obtain housing, 250,000 new homes per year are needed compared to the 150,000 per year actually built in the last decade.

1.2 Inadequate rates of housebuilding, especially of social housing, has 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 recently published Review of Housing Supply undertaken by Kate Barker, which postulates substantial increases in housebuilding in order to reduce house price inflation.

1.3 The new Regional Spatial Strategy (RSS) for the South East - the `South East Plan' - will set the amount of housebuilding to be provided for in Hampshire. Maintaining current rates of building up to 2026 would mean earmarking land for another 58,000 dwellings (1,450 hectares at 40 dwellings per hectare) on greenfield sites over and above that already provided for by the Hampshire Structure Plan. Higher housebuilding rates - as mooted in the Barker Review - could require land for up to 200,000 extra dwellings (5,000 hectares). Ways of accommodating this extra housing include new Major Development Areas, a new settlement, incremental expansion of all Hampshire towns, development along public transport corridors and higher densities.

1.4 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.

1.5 This Committee needs to be well briefed on these issues and their implications for Hampshire in order to scrutinise the emerging regional and sub-regional documentation relating to the South East Plan.

2. Corporate Strategy

2.1 This report supports Aim 3 of the Corporate Strategy (Achieving Economic Prosperity) by helping to ensure that the employees of Hampshire firms are satisfactorily housed.

3. Introduction

3.1 Providing a decent home for everyone who wants one is a hallmark of a civilised society. More housing will be needed 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.

3.2 These matters and the planning system's role in the operation of the housing market are explored in the recently published `Review of Housing Supply' carried out by Kate Barker at the request of the Chancellor of the Exchequer and Deputy Prime Minister. The `Barker Review' sets out a raft of recommendations, ranging from changes in planning policies and procedures, to tax changes and more Government spending on housing. The Government will, over the next 18 months, decide which recommendations it will implement.

3.3 More immediately, some crucial decisions will need to be made over the coming months on the amount, type and location of new housing which will be planned for by the South East Plan and any component sub-regional strategies. Hampshire County Council needs to formulate a view on these matters so that it can seek to influence strategy preparation in an informed, articulate way and then respond when consulted on the draft South East Plan. This report seeks to initiate discussion on the issues as part of this Committee's role in assisting with policy formulation.

4. A Housing Crisis

4.1 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.

4.2 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.

4.3 The number of households in England could rise by over three million between 2001 and 2021 according to latest Government projections. In addition, 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.

4.4 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.

4.5 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.

4.6 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.

4.7 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.

4.8 In only 10 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.

5. The 'Barker Review'

5.1 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 report of her review was published in March 2004.

5.2 The report finds 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.

5.3 Too few houses and consequent higher house prices create affordability problems. According to the 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.

5.4 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.

5.5 The report reaches no conclusion on how many houses should be built in future, but it sets out three scenarios for additional new private sector housebuilding, which would reduce house price inflation and price households back into the housing market. The scenarios are against a baseline of the 125,000 new private homes built in England in 2002/03:

(i) the Government's already announced Sustainable Communities Plan = an extra 20,000 new homes per annum;

(ii) reducing real house price rises to 1.8% per annum = an extra 70,000 per annum; and

(iii) reducing real house price rises to 1.1% per annum = an extra 120,000 per annum.

5.6 The report says that seeking to reduce house price increases to zero in real terms is undesirable and unachievable. It also believes that construction of social housing must also be stepped up, by between 17,000 and 26,000 per annum in England. This would have implications for investment by Government.

5.7 The Report acknowledges that housing numbers are only part of the story; where houses are built and how much space they have are also important. It recognises too the important role of town planning in shaping sustainable communities and that local housing markets vary. Thus its recommendations seek to establish a broad framework capable of being adapted to differing regional circumstances, rather than a one-size-fits-all approach. It also acknowledges that new houses are only 1% of the total housing stock, so the impact of increasing housebuilding itself will only marginally affect house prices - expectations play an important role. Hence the Report says it adopts a cautious approach on policy recommendations.

5.8 The Report's key recommendations are set out in the appendix to this report.

6. The South East Plan

6.1 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.

6.2 The review of the Guidance is now being taken forward through the preparation of the inaugural Regional Spatial Strategy 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.

6.3 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 and take account of the Barker Review conclusions. 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 (calculated by Kate Barker as that needed to keep housing affordable for new households in line with that in the 1980s); and

(iv) a 94% to 150% increase (Kate Barker's projection for reducing the long term trend in house prices to 1.1% or zero-rated real growth).

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

7. The Amount of New Housing in Hampshire

7.1 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.

7.2 Interpreting the above into a Hampshire context yields some potential scenarios for the county, including Portsmouth and Southampton. These are set out in the table below:

7.3 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 (1,450 hectares at an average of 40 dwellings per hectare).

7.4 The higher projections would require even more; in the case of the highest projection 200,000 dwellings (5,000 hectares) over and above the baseline supply and reserve housing sites.

8. Options for Accommodating New Housing in Hampshire

8.1 Whatever the amount of new housing to 2026 which the South East Plan 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 Major Development Areas (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.

9. Type of New Property

9.1 As explained in paragraph 4.1, the bulk of new housing is required for new households arising from people already living in an area, and not for in-migration. 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.

9.2 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.

9.3 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.

9.4 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.

10. Affordable Housing

10.1 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.

10.2 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.

10.3 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 currently take 18 years to house all those in housing need, let alone provide affordable housing for future new households and people moving into the area.

11. Conclusion

11.1 The Barker Review has brought the debate about future housing provision into sharp focus. Although the Government's response to the Review's recommendations will not be known for some while, the recommendations need to be considered as part of the preparation during the next few months, of the draft South East Plan. This Committee should play a key role in that process by scrutinising the emerging regional and sub-regional documentation on behalf of the County Council. This report aims to assist in that role by briefing the Committee on both the Barker Review and the overall housing `debate'. Any initial Member views are invited on the issues covered by this report.

11.2 Finally. this report has focused exclusively on housing and has not looked at the natural resource and environmental implications of future house buildings nor its relationships with employment, transport and other topics. This reflects the importance attached to the housing topic by Government, interested organisations and the public. The implications for and interrelationships with those other matters are very important and are being examined as part of technical work on the South East Plan and sub-regional studies (see separate report to this meeting).

Recommendation

That the Committee recognises that the planning of future housing provision will be a key issue in the preparation of the South East Plan, and that the Committee has a key role in scrutinising the emerging regional and sub-regional documentation to ensure that an appropriate balance is struck between the provision for housebuilding and other considerations.

8607/SR

APPENDIX

KEY RECOMMENDATIONS IN KATE BARKER'S `REVIEW OF HOUSING SUPPLY'

1. The Government and Regional Planning Bodies should establish national and regional housing affordability targets (recommendations 1 and 5).

2. Regional Planning Bodies and Regional Housing Boards should be merged (recommendation 6).

3. Government should revise its Planning Policy Guidance so that market considerations determine the amount and location of new housing unless other considerations override this, in which case the latter should be based on sound evidence and set out the associated costs (recommendation 7).

4. Allocations of land for housebuilding in District Council Local Plans should include a 'buffer' of additional land to allow for sites that prove to be undevelopable because of site specific problems, etc (recommendation 9).

5. An additional 'buffer' - say 20-40% - of land should be allocated for housing, which could be triggered at a future date in response to market signals (recommendation 9).

6. Two new routes for developers to gain planning permission (recommendation 11).

7. Changes to local authority funding to reflect expected housing growth and incentivise authorities to meet housing growth targets (recommendations 17 and 18).

8. Measures to reduce delays to development caused by the Highways Agency and other infrastructure providers (recommendation 20).

9. A tax to be introduced on the windfall profits to landowners from the sale of their land for housing development (recommendation 26).

10. Additional investment in social housing provision, ramping up to £1.2-£1.6 billion per annum, although not all funded from Government (recommendation 27).

11. District Councils in selecting sites for housing development should favour smaller sites for development because these will increase competition between builders, and then seek to agree build-out rates with developers at the planning application stage (recommendation 32).

12. The housebuilding industry must take steps to increase customer satisfaction with new homes and modernise house construction methods (recommendations 32 and 33).