Our new national campaign calls on Michael Gove to scrap the ‘Standard Method’

We have launched a campaign to get as many people as possible to write to Michael Gove, the Secretary of State for Housing, asking him to scrap - or at least to re-think - the standardised system of calculating housing figures which is being imposed on local councils up and down the country, including in Lewes.

Called the ‘Standard Method’ the system is based on incorrect and outdated population projections and ties the hands of local planners into delivering inflated numbers of new houses, that do nothing to alleviate affordable housing needs.

It is one of the key reasons that an otherwise unthinkable proposal like Eton’s plans for a 3,000-house new town at East Chiltington is even being considered. Imagine if 500 acres of our precious downland countryside were to disappear under concrete just because of this bureaucratic blunder…

Here are some of the main points we are asking people to make:

·       The ‘Standard Method’ which all councils currently have to use to calculate housing numbers uses obsolete and inaccurate population forecasts dating from 2014 and should be scrapped, or at least re-thought

·       More recent figures from the ONS in 2016 and 2018 show reductions in population growth, in many areas, especially in London and the South East. This trend is likely to continue, reflecting smaller increases in life expectancy, falls in the birth rate and the impact of Brexit on net migration

·       The ‘Standard Method’ is forcing councils like Lewes to meet unnecessarily inflated house-building targets that go way beyond those in its previous Local Plan. Lewes now has to meet a target of 782 new homes a year – an additional 15,640 homes over 20 years, which is a huge increase of almost 38%.  With few brownfield options, the council is forced to consider greenfield alternatives – including proposals for a 3,000-house new town on 500-acres of pristine countryside, adjacent to a national park at the foot of the South Downs. This site, owned by wealthy landowners Eton College has no existing infrastructure at all – not even mains gas, electricity or sewerage or any main roads. This goes against all planning logic and best practice and defies all environmental considerations, including Boris Johnson’s pledge not to build new homes on green fields, at a time when the government has also committed to halting the progress of climate change

·       By moving away from the ‘Standard Method,’ higher housing targets could be directed to areas where there is most available brownfield land, where housing is more affordable and where the economy needs a boost. This will ease pressure to build on the countryside around here – and help the government’s levelling up agenda.

Here’s what we need you to do.

Please write a short letter in your own words and send it by post to:

The Right Hon Michael Gove MP
Secretary of State for Levelling Up, Housing and Communities
Department for Levelling Up, Housing and Communities
2 Marsham Street
London
SW1P 4DF

Or email to: correspondence@communities.gov.uk

The ‘Standard Method’ and its implications for the Lewes District

Since 2018, councils have had to calculate local housing projections using a complicated government-imposed standardised formula called the ‘Standard Method.’ This uses population growth forecasts based on 2014 figures produced by the Office of National Statistics (ONS).

Even though the 2014 figures still have to be used by local authorities, they are very outdated, having been superseded by ONS 2016 and 2018 projections which both show reductions in population growth in many areas, most especially in London and the south east.

In the Lewes District, the standardised 2014 projections suggest an 11.9% growth in household numbers over the next 10 years. But the 2018 ONS projections suggest a more realistic increase of just 7%.

New ONS projections using 2020 figures will soon be available and are expected to show further reductions in population growth, reflecting smaller increases in life expectancy, falls in the birth rate and the impact of Brexit on net migration. In Lewes District, data from East Sussex County Council Public Health Department shows a year on year decrease in the number of births and increase in the number of deaths from 2015 to 2019. In 2019 alone, there were 333 more deaths than births.  

Affordability Factor

The ‘Standard Method’ also includes an adjustment to take account of ‘affordability.’  The theory behind this is that more houses need to be built to make homes more affordable in areas where the gap between incomes and house prices is high. The problem is that the affordability factor is calculated by using a standardised “average house price to average earnings” ratio. But in Lewes, the incomes used were not the actual earnings of Lewes residents as a whole – including those commuting to work outside the district - but the much lower earnings of those actually working in Lewes District itself.

There’s no explanation of the rationale used for calculating the affordability factor, and the formula itself seems quite arbitrary. Since the adjustment only adds around 0.5% to the overall housing stock, its unlikely to make a material impact on local housing prices in any case. It has been shown repeatedly that availability of finance for housing is the key factor in causing prices to go up.

Under this flawed system, Lewes is being asked to meet a target of 782 new homes a year – an additional 15,640 homes over 20 years, which is a huge increase of almost 38%. It would be virtually impossible to provide the infrastructure necessary to accommodate such an increase.

As well as the threat of the Eton new town at East Chiltington, other rural communities like Ringmer, Wivelsfield Green and Plumpton Green are also facing large-scale development on ever-decreasing areas of open countryside. The Government says it is committed to curbing climate change but is failing to protect our natural environment and its wildlife, put in measures to soak up more carbon and ensure we have adequate farmland for food production.

And here’s more detail…

There are three elements to the ‘Standard Method’:

1.     Baseline growth

·       In order to establish a ‘baseline growth rate’ the council should use local area household growth projections produced by the ONS. The projections used for the current numbers suggest that households in Lewes will grow by 11.9% over the next 10 years (2021 – 2031)

·       On the basis of estimated housing numbers in Lewes in 2021 (47,114) then this suggests that 5,558 new houses should be built, or 555.8 per year

2.     Adjustment to take account of affordability

·       The idea of affordability adjustment is that in areas where house prices are high relative to average earnings an adjustment should be made in order to increase the number of houses thus, through the laws of supply and demand, reducing the price and making them more affordable in that particular area

·       The affordability adjustment is calculated using the most recent median workplace-based affordability ratios at local authority level, published by the ONS (the affordability ratio is the ratio of average house prices to average earnings – in Lewes it’s 11.5). For each 1% the ratio is above 4, housing numbers should be increased by 0.25%. Lewes’s ratio is 187% above 4 so this suggests that housing numbers should be increased by a further 46.9% i.e. an increase from 556 pa to 820 pa

3.     Capping the level of increase

·       There is a cap for the affordability factor which is, for most districts (inc Lewes), 40%. So, the actual number of houses for the district is 556*1.4 = 782 houses per year

Currently 77% of the Lewes District’s houses are outside the National Park (but only accounts for 44% of the land area) and this is the proportion of the housing numbers that are allocated to the non-SDNP areas of the district. How the numbers are split between SDNP and non-SDNP is down to LDC. So, the non-SDNP element of the 782 target is 602.

Criticisms of the Standard Method

1.     The Standard Methodology is methodologically flawed

A key problem with the standard methodology is the use of an affordability factor derived from the relationship between house prices and local incomes. For Lewes the affordability factor is 1.47.

The theory behind the affordability factor is that more houses need to be built to make homes more affordable in areas where the gap between incomes and house prices is high. However, there is no explanation in the documentation of the rationale for the methodology for calculating the affordability factor, and the formula itself appears quite arbitrary. It does not seem to be based on any empirical evidence. The number of additional houses produced by using the factor is small as a proportion of the overall housing stock (around 0.5%) and unlikely to make a material impact on local housing prices, which will clearly depend on the price elasticity of housing supply and demand over a period of 10 or 20 years. On the basis of a reasonable estimate of the elasticities, it would only reduce prices by a few percentage points compared to what they otherwise would have been. In addition, it has been shown repeatedly that availability of finance for housing is the key factor in causing house prices to go up. To make things even worse, in calculating the affordability factor the incomes used were not the actual incomes of Lewes’s residents, but the (much lower) incomes of the Lewes residents who actually work in Lewes.

2.     The standard method uses inappropriate and obsolete data leading to unachievable targets

The government insists that the standard method calculations are based on the ONS’s 2014 based population and household formation projections (Local Authority Household Projections: 2014 based, ONS). There is no logic to this as it is now accepted that there were methodological problems with the 2014 projections. The subsequent projections, 2016 and 2018 based, show substantially lower growth in household numbers in many areas (Local Authority Household Projections: 2016 and 2018 based, ONS). While there has been a reduction in population growth for the whole of England the reductions are particularly marked within London and the South-East.

It is problematic that the government tells local authorities to use these outdated figures, especially given that the National Planning Policy Framework (NPPF) makes the point on several occasions that plans must be based on the most up to date information and data.

The graph below shows that the 2014 housing projections for Lewes District are well above the 2018 ones, which have already been proven to be too high for the years 2015 – 2018. The 2014 projections suggested that the growth in household numbers in Lewes would increase from an historic growth of 0.67%pa to 1.08%pa over the next 25 years (an increase of 62% in the growth factor). The 2018 projections suggest a much more believable increase from 0.67%pa to 0.72%pa (an increase of just 7%). The next set of national household projections (due in November 2021) are almost certain to show a further reduction in growth, due to smaller increases in life expectancy, falls in the birth rate and the impact of Brexit on net migration.

To put the numbers imposed on LDC into context, according to the ONS 2018 based household projections, in 2020 there were 45,105 homes in the Lewes district. An additional 15,640 homes (782 per year for 20 years) would represent an increase of almost 35%.  The infrastructure that would have to be provided for such an increase in houses would be virtually impossible to provide. In the 30 years from 1990 to 2020 only a little over 8,000 new homes have been built.

3.     The split of housing numbers between areas inside and outside the SDNP

It is surprising that the Council has not sought opinions on different potential apportionments of the 782 units between the South Downs National Park Authority (SDNPA) area and the remainder of the District and has taken the apportionment of 602 outside the SDNP area as “fixed”. The SDNP differs from many other national parks in the sense that it is linear and not “remote, lying adjacent to several urban settlements”. As a result, the SDNP is not a housing market area in its own right, but one that forms part of a number of neighbouring housing market areas. Therefore, the logic of determining the requirement of the District outside the SDNP in relation to the size of the existing housing stock merits further consideration.

Spatial growth options do not typically look to simply allocate proportionate growth to every settlement so why should that approach be automatically used between the SDNPA area and its hinterland? The largest settlement in Lewes District is Seaford. Development there is intrinsically sustainable yet the SDNP boundaries to the north have been taken as an absolute constraint. Lewes town is subsumed within the SDNP yet remains an important service and cultural centre. Shopping areas in towns such as these are likely to see a decline in retail activity in the coming years, opening up opportunities for re-development as housing. Issues such as these should be considered in judging the appropriate balance of housing development between the areas of the Lewes District inside and outside the SDNP.