HOW MANY NEW HOMES DO WE NEED?

10 March 2006

The Government is about to publish long awaited projections of household formation.

'The projections are not forecasts, estimates or predictions. They are based entirely on what might be expected to occur if previous trends continue and are heavily dependent on the assumptions involved. Such trends can and do change...'

The Rt. Hon. John Prescott MP on the 1999 household projections
Hansard, 29 March 1999, column 471

1. This week — on Tuesday, 14 March — the Government is expected to publish long awaited projections for the number of households expected to form in each English region over the next 20 years. These will be the first nationally published projections to take account of 2001 census data.

2. These projections will become part of the national debate about how many new homes we need and where they should be built. The Office of the Deputy Prime Minister has pre-empted them by announcing at the time of the Chancellor's Pre-Budget Statement last November that it wanted housebuilding to rise to a level of 200,000 homes a year (160,000 were completed in 2005).

3. CPRE has a keen interest in how these projections are interpreted because new homes —- especially those built on greenfield land — have a major impact on the countryside and the overall environment.

4. Population growth is one important component of the rising number of households in England. This growth is due to net international immigration into the UK and a 'natural increase' as births exceed deaths. However, a more important driver of the growth in household numbers in recent years has been a fall in average household size. People are spending more of their lives living on their own — through choice, through lengthening life spans and widowhood. Rising divorce rates have also played a part.

4. The previous set of household projections, published in 2004, were based on 1996 data on household formation, which in turn were based on the 1991 census. This projected a 3.8 million increase in the number of households in England between 2001 and 2021 (from 20.8 million to 24.5, a 17% increase). The largest increases were expected in London (+27%), the East of England (21%), the South West (20%) and the South East (19%).

5. The household projections are extrapolations of recent historical trends into the future. They are not a reliable indicator of what will actually happen. CPRE is concerned about the dangers involved in relying on projections to determine the level and location of new housing development through the planning system. Relying on a projected growth in the number of households to determine planned growth in the number of homes is inappropriate, since the key relationship is between the total number of households and the total housing stock. Using data from the 2001 census, Alan Holmans (an acknowledged expert in this field) has estimated a current surplus of housing over households in every English region with the possible exception of London [1]. Estimates of the number of new homes needed should look at the total housing stock, vacancy rates and other indicators of the efficiency with which it is used, such as under-occupation.

Trend-based projections

6. In order to calculate the household projections a number of assumptions are made, based on estimates of:

• 'natural' population change (due to changes in births and deaths);
• net immigration from overseas;
• internal migration - from one region to another;
• the changing size and type of households that people live in, as they make choices to live with others (marriage, cohabitation) or on their own.

7. A wide range of factors, such as changes in interest rates, household incomes and welfare benefits, can profoundly affect household formation rates. So can changes in national and local policy, lifestyles and the cost and availability of housing. Small changes in the assumptions and data used can significantly affect the resulting projections. There have also been concerns about the reliability of data, particularly at a sub-regional or local level.

8. CPRE does not accept the fundamentally unsound assumption that we should plan the future simply on the basis of what has happened in the past. The Government officially abandoned this 'predict-and-provide' approach to planning for housing in 2000 in favour of a better-informed approach using the principles of 'plan, monitor and manage'. A crude 'predict and provide' approach conflicts with the emphasis in the Government's recent planning reforms to work towards a vision for the future of communities and their environment.

Circular projections?

9. The supply of housing influences the demand for it. Constructing new private housing in an area actively encourages in-migration, which in turn can lead to further demand in the future. Thus if planning and housing policies encourage a major exodus from larger towns and cities, that will lead to ongoing demand for new homes in the more rural areas in future decades.

10. Since 2000, Government policy on planning for housing has secured important and valuable successes, including an increase in the proportion of new housing on previously developed ('brownfield') urban sites to over 70% and less wasteful use of housing land, with the average density rising to 40 dwellings per hectare. At the same time housebuilding levels have been rising; in 2005 they reached the highest figure for 16 years.

11. A return to a 'predict and provide' approach based on mechanical projections of past trends would undermine these achievements. This would lock us into a cycle of urban decline and countryside sprawl, with potentially grave social and environmental consequences.

An alternative approach

12. CPRE believes that in responding to household growth public policy should become less dominated by trend-based projections and take greater account of the implications for future lifestyles, quality of life and the quality of the environment. This requires a new approach to housing supply which takes as its starting point the Government's Sustainable Development Strategy and the recognition that development must respect environmental limits. Based on an understanding of the environmental capacity of places to accommodate new development and persistent regional disparities, this approach could take greater advantage of opportunities for urban renewal to meet wider social, economic and environmental objectives.

Notes

1. Holmans A.E., Housing and Dwellings in England in 1991 and 2001: A post-2001 Census Analysis, 2004.

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