The Housing Market & the Strategic Housing Market Needs Assessment (SHMNA)
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Cornwall Local Plan: Housing Evidence Base The Housing Market & the Strategic Housing Market Needs Assessment (SHMNA) Housing Evidence Base Briefing Note 2: National Policy Context The NPPFi (paragraph 159) states that ‘local planning authorities should have a clear understanding of housing needs in their area. They should prepare a Strategic Housing Market Assessment to assess their full housing needs, working with neighbouring authorities where housing market areas cross administrative boundaries. The Strategic Housing Market Assessment should identify the scale and mix of housing and the range of tenures that the local population is likely to need over the plan period which: • Meets household and population projections, taking account of migration and demographic change; • Addresses the need for all types of housing, including affordable housing and the needs of different groups in the community (such as but not limited to, families with children, older people, people with disabilities, service families and people wishing to build their own homes), and • Caters for housing demand and the scale of housing supply necessary to meet this demand’. This ‘duty to co-operate’ is set out in legislation in the Localism Act 2011 section 110ii. Recently released draft National Planning Practice Guidance on the ‘Assessment of Housing and Economic Development Needs’iii supports local planning authorities in objectively assessing and evidencing development needs for housing (both market and affordable) and economic development (which includes main town centre uses). The assessment of housing and economic development needs includes the Strategic Housing Market Assessment requirement as set out in the National Planning Policy Framework. Once formalised, this will replace the previous 2007 guidance on ‘Strategic Housing Market Assessment Practice Guidance’iv. Definition Access to a good quality home at an affordable price is a basic human need. Housing covers all types of housing related development required to meet the needs of the current and future population. Housing ranges from open market housing for those who can afford to purchase one or more properties to affordable housing which can either be rented or partly owned. It includes specialist housing such as sheltered accommodation for elderly or vulnerable people with specific needs. Housing also takes account of the needs of migrant workers and includes residential and transit sites for gypsies, travellers and travelling show people. A housing market area is a geographical area defined by household demand and preferences for all types of housing, reflecting the key functional linkages between places where people live and work. The extent of the housing market areas identified will vary, and many will in practice cut across various local planning authority administrative boundaries. Local planning authorities should work with all the other constituent authorities under the duty to cooperate. What is the Housing Market? The Housing Market refers to the supply and demand for houses, usually in a specific area or region and includes the following features Version 1: November 2013 1
Cornwall Local Plan: Housing Evidence Base • Supply of housing – quantity, mix, types and tenures of housing stockBN13; • Demand for housingBN1 and competing demands for housing BN11; • House pricesBN14; • Rented sector, buy to let investment and demand from tenantsBN16; • Intervention in the housing market in terms of social housing etcBN10. There are a number of factors which affect the housing market, including interest rates, the state of the mortgage industry which will determine whether people are eligible for mortgages or notBN14, levels of economic growthBN5, local incomesBN17, unemployment rates, and populationBN3 and householdBN4 trends. Household growth, employment status and the income of households form important drivers in understanding the operation of the housing market. House price transactions and rental activity represent a direct indicator of the health of the market. The operation of the active housing market is dependant upon households being able to move both within and between tenures. It is widely accepted that the recent national economic downturn, and constraints on mortgage finance (including increases in required mortgage deposits), have significantly reduced the volume of household movement in the housing market nationally. This in turn places increasing pressure on both the private rented and social rented market. The Current Market Context The Housing Strategy for Englandv acknowledges that the current housing market is not working and that the country is experiencing a situation where: • Buyers can’t buy – the average age of an unassisted first time buyer continuing to rise and families struggling to ‘trade up’; • Lenders are not lending enough – high deposit requirements exclude young people and families from home ownership; • Builders are not building – not enough consumers ready to buy, not enough land for development in the planning system or access to finance; • Investors are not investing – without the right framework or incentives in place; • Affordable housing could do more if enough were built – in terms of delivering new homes and supporting the social mobility and aspirations of tenants and communities; and • Tenants are struggling – as pressures increase in the private rented sector and rental prices escalate. McDonaldvi in his presentation recognises that if demand for housing increases without an increased supply we will be back to the ‘boom and bust’ experienced over the past three decades. The Government has a number of initiativesvii in place such as the ‘Help to Buy’ schemes to boost both the supply of new housing and how people can get help to access the housing they requireBN14. Work undertaken for the SHMNA for Cornwall recognises the challenges posed by current market conditions. This work evidences a sustained need for affordableBN10 housing tenures over the plan period as the current market and finance context presents a significant potential obstacle to delivering sufficient numbers of affordable housing to address need. Version 1: November 2013 2
Cornwall Local Plan: Housing Evidence Base Over the plan period it is important that policy and strategy aid in delivering a housing stock which matches the objectively assessed needs BN1 and requirements of the local authority’s current and future residents and achieve a ‘balanced housing market’. What is a Strategic Housing Market (Needs) Assessment? The approach to developing an understanding of the demand for market and affordable housing within a market area is through the preparation of a Strategic Housing Market Assessment (SHMA). There was no up to date guidance available which set out how a SHMA should be conducted when Cornwall Council undertook their assessment with neighbouring authorities and the existing guidance prepared in 2007viii was used. A revised version of the guidance was made available during August 2013 following the Taylor review of planning guidance. This ‘Assessment of Housing and Economic Development Needs’ix includes guidance as to the SHMA requirement as set out in the National Planning Policy Framework. The key output of a SHMA is to provide evidence of what level, type and tenure of housing is likely to be needed in that housing market area. Local authorities need to understand the evidence for the whole area, including neighbouring authorities, as well as the different sub market that exist within their area. Paragraph 159 of the NPPF sets out that local authorities should work with neighbouring authorities where housing market areas cross administrative boundaries. This ‘duty to cooperate’ is both a statutory test and a key issue when assessing the soundness of local plans Cornwall’s Strategic Housing Market Needs Assessment Cornwall Council with the neighbouring authorities of Plymouth City Council, West Devon Borough Council, South Hams District Council and Dartmoor National Park embarked on a joint SHMNA in 2013. The following conclusions from the SHMNAx for Cornwall are vital in achieving the goal of meeting ‘objectively assessed need’: • The modelling of future population projectionsBN3 indicated that there will be a sustained need for new housing to meet the needs of a growing population linked to historic and projected demographic trends as well as the future levels of jobsBN5 forecast to be created in the authority. • In total the SHMNA suggests that there will be a requirement for between 47,300 and 71,980 dwellings over the next twenty years to meet the demands generated by new householdBN4 formation and the labour force demands of a growing local economyBN5. • The analysis of the current need for affordable housingBN10 in Cornwall over the next five years indicates a high demand for this tenure. An annual need of 2,240 affordable properties is calculated as being required to meet newly arising need over the next five years as well as the existing backlog. The level of overall need reflects the impact of rising house prices over the first half of the last decade and the continued pressures on wages (i.e. household income) as well as the availability / affordability of mortgage finance. It also reflects the fact that affordable housingxi makes up a relatively low proportion of the overall stock in the authority currently, approximately 12%, a proportion which is considerably below the national average of 17%. • The changing age profile of the projected populationBN3 of Cornwall indicates that under all modelled scenarios there will be a substantial increase in older persons. Under all of the scenarios there is projected to be an increase in working age persons and children with the scale of increase considerably greater under the employment-led scenarios with this linked to the assumptions around the required in-migration of working age persons to match increases in job opportunities. Overall the number of older persons is projected to increase significantly. The Version 1: November 2013 3
Cornwall Local Plan: Housing Evidence Base
projections indicate that older persons will make up between approximately 15-
16% of the total population by 2031 compared to just over 10% in 2011.
• In addition to older person households the projections also indicate that in order to
maintain a level of working age population to match employment opportunities
there will be a sustained need for family housing within the authority.
• Specifically in terms of affordable housingBN10 the analysis indicates that there will
be a high demand for smaller properties, 1 – 2 bed, with need for this size of
property making up 82% of total need. Importantly, however, the lower levels of
turnover in larger properties also suggests that in order to address future need and
the current backlog, new larger affordable properties will also be required to allow
choice within the housing market.
Risk Assessment
Many aspects of delivering housing are out of the control of the local authority and
this has been demonstrated over the last few years as the impact of the recession has
been felt in terms of the limited ability of house builders to deliver new houses and
the ability of potential home owners to access housing.
Use in the Cornwall Local Plan
The SHMNA is a key document in determining the housing requirement for a planning
authority and the Cornwall SHMNA has been used to provide the housing target for
Cornwall for 2010-2030 i.e. 47,500 which is mainly based on the SHMNA demographic
projection of 47,300.
The SHMNA report was clear that the demographicBN2 BN3 scenario outputs should be
considered to represent a minimum for understanding the housing pressures likely to
result from the growth in households, considering the latest demographic evidence at
the time of the research. The report also concluded that it is considered sensible to
view the higher employment-led projectionsBN5 as an important benchmark for
understanding the potential further growth of Cornwall recognising this will be driven
by a continued in-migration of people from outside of the study area looking to take
up new employment opportunities. The consideration and treatment of factors such as
unemployment, economic activity rates and so on suggests that these will be upper
levels assuming the underpinning levels of job growth are not exceeded over the
projection period.
The SHMNA is also the key document in determining the need for affordable
housingBN10 in a planning authority area.
Examination Findings
The ‘duty to cooperate’ is both a statutory test and a key issue when assessing the
soundness of local plans. If an assessment of the housing needs of an area is
inadequately carried out, the Planning Inspectorate will find the plan ‘unsound’ and it
cannot be adopted. While the information may not be as easily available for the
housing market area, compared with that available on an individual authority basis,
there are considerable risks of working alone to assess the affordable and market
housing needs. Inspectors in a number of core strategy examinationsBN20 have
criticised authorities for not having or taking adequate account of accurate and up to
date information available for the whole market area.
Cornwall has worked with neighbouring authorities on a SHMNA to assess the
objectively assessed need for housing for each of the constituent authority areas.
Version 1: November 2013 4Cornwall Local Plan: Housing Evidence Base
Accompanying Briefing Notes:
• BN1 – Objectively Assessed Need;
• BN3 – Population & Population Projections;
• BN4 – Households and Household Projections;
• BN5 – Jobs, Housing & Economic Growth;
• BN10 – Affordable Housing;
• Bn11 – Second & Holiday Homes;
• BN13 – Housing Mix, Types & Tenures;
• BN14 – House Prices & Affordability;
• BN16 – Private Rented Sector;
• BN17 – Incomes & Earnings;
• BN20 – Local Plan Examination Findings
Further Information:
1. A Simple Guide to Strategic Planning and the ‘Duty to Cooperate’xii – provides more
detail in relation to the ‘duty to cooperate’.
i
DCLG (2012) National Planning Policy Framework -
https://www.gov.uk/government/publications/national-planning-policy-framework--2
ii
Home Office (2011) Localism Act 2011 -
http://www.legislation.gov.uk/ukpga/2011/20/pdfs/ukpga_20110020_en.pdf
iii
DCLG (2013) The Assessment of Housing and Economic Development Needs -
http://planningguidance.planningportal.gov.uk/blog/guidance/assessment-of-housing-and-
economic-development-needs/what-is-the-purpose-of-the-assessment-of-housing-and-
economic-development-needs-guidance/
iv
DCLG (2007) Strategic Housing Market Assessments Practice Guidance -
https://www.gov.uk/government/publications/strategic-housing-market-assessments-practice-
guidance
v
DCLG (2011) Laying the Foundations: a housing strategy for England -
https://www.gov.uk/government/publications/laying-the-foundations-a-housing-strategy-for-
england--2
vi
Neil McDonald (2013) How do we get to 250,000 homes a year? –
http://www.cih.org/resources/PDF/Marketing%20PDFs/Presentations/housing2013/Neil%20Mc
Donald%20How%20do%20we%20get%20to%20250000%20homes.pdf
vii
DCLG (2013) Help to Buy - https://www.gov.uk/affordable-home-ownership-schemes
viii
DCLG (2007) Strategic Housing Market Assessments Practice Guidance -
https://www.gov.uk/government/publications/strategic-housing-market-assessments-practice-
guidance
ix
DCLG (2013) Assessment of Housing and Economic Development Needs -
http://planningguidance.planningportal.gov.uk/blog/guidance/assessment-of-housing-and-
economic-development-needs/what-is-the-purpose-of-the-assessment-of-housing-and-
economic-development-needs-guidance/
x
GVA/Edge Analytics (2013) Strategic Housing Market Needs Assessment Main Report:
Plymouth City Council, South Hams District Council, West Devon Borough Council, Cornwall
Council and Dartmoor National Park
xi
Office for National Statistics (2012) 2011 Census – http://www.ons.gov.uk/ons/guide-
method/census/2011/index.html
Version 1: November 2013 5Cornwall Local Plan: Housing Evidence Base xii Planning Advisory Service (2012) A Simple Guide to Strategic planning and the ‘Duty to Cooperate’ - http://www.pas.gov.uk/pas/core/page.do?pageId=2133454 Version 1: November 2013 6
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