Wealden OAN Update Draft Paper: 2013-2028

A Draft Report by Regeneris Consulting

Wealden District Council

Wealden OAN Update Draft Paper: 2013-2028

March 2017

Regeneris Consulting Ltd www.regeneris.co.uk

1

Wealden OAN 2013 – 2028

1.1 Regeneris Consulting Ltd has recently been commissioned by Wealden District Council to undertake a review of its Strategic Housing Market Assessment1. The aim of this work was to provide an updated assessment of the objectively assessed housing need based on the most recent (2014-based) population and household projections released by the Office for National Statistics (ONS) and Department for Communities and Local Government (DCLG) respectively in June 2016. This initial study focused on a proposed plan period for 2013 to 2037.

1.2 Following completion of this work, Regeneris was re-commissioned to look at a slightly shorter period than that assessed in the initial work – ie. 2013 to 2028. This note presents our findings for this shorter period, and follows the same format used in the Wealden OAN Update2 paper from January 2017.

1.3 In most instances, the assumptions used to inform this note are the same as those used in our earlier paper. Where these vary, a short description is included to explain what the differences are, and how these might influence the OAN figures for this shorter period (ie. 2013 to 2028). As such, we recommend reading this note in conjunction with the January 2017 paper.

Objectively Assessed Need for Wealden

Starting Point Projections

1.4 As per the January 2017 paper, the starting point for establishing Wealden’s OAN is the 2014-based Sub-National Household Projections and the 2014-based Sub-National Population Projections on which these are based. The table below shows that based on these official projections, overall housing need in the Wealden District between 2013 and 2028 is expected to be around 13,700 additional dwellings or 913 dwellings per annum.

Table 1.1 Starting point based on official DCLG projections, 2013-28

Population increase 23,900

% increase in population 15.7%

Household increase 13,400

% increase in households 20.7%

Additional dwellings (2013-28) 13,700

Dwellings per annum 913

Source: DCLG, Sub-National Household Projections, 2014; ONS, Sub-National Population Projections, 2014

Please note: total figures are rounded to the nearest multiple of 100, annual figures are not rounded.

1.5 The difference in annual housing need for the 2013 to 2028 period (ie. 913 dwellings per annum) is around 34 additional dwellings per annum when compared with that for the 2013 to 2037 period (ie. 879 dwellings per annum). The difference between the two periods can be explained partly as a result of changes in the (average) components of change underlying the two periods. The table below compares the average yearly components of population change for the two. It shows that overall, there is very little difference between the two periods, with the main difference being a

1 Wealden District Council, Strategic Housing Market Assessment – Final Report, December 2015

2 Regeneris Consulting, Wealden OAN Update, January 2017

2

lower mortality rate (by c. 130 people per annum) for the 2013-28 period. This results in a higher natural change, and steeper population growth when compared with the 2013-37 period.

1.6 In addition, the table also shows that both internal in and out-migration are expected to be lower over the shorter period. That said, net internal migration is expected to be only around 41 fewer migrants each year over the 2013-28 period. International migration (both in and out) is expected to be similar over the two periods, and as such very little difference is seen in net international migration numbers between the two periods.

Table 1.2 Differences in components of change for 2013-28 and 2013-37 periods 2013-28 2013-37 Difference

Births 1,379 1,387 -8

Deaths 1,700 1,830 -130

Natural change -321 -443 +122

Internal in-migration 9,007 9,278 -271

Internal out-migration 7,300 7,530 -230

Net internal migration +1,707 +1,748 -41

International in-migration 507 504 +3

International out-migration 300 300 0

Net international migration +207 +204 +3

Source: ONS, Sub-National Population Projections, 2014

Alternative Migration Scenarios

1.7 As per the Wealden OAN Update paper, we have also tested a couple of alternative migration scenarios based on short-term (ie. 6 years, starting in 2006) and long-term (12 years, starting in 2001) migration trends, averaging 1,167 and 1,118 net migrants respectively. These assumptions are the same as those used in the January 2017 paper.

1.8 Using these assumptions, we estimate that based on short-term migration trends, total housing need in the Wealden District for the 2013-28 period would be around 12,900 additional dwellings or 862 dwellings per annum. Once again, this is somewhat similar to the figure identified by the 2014-based SNPP for the same period (ie. 913 dwellings per annum).

1.9 Long-term migration trends are thought to have been influenced by the economic recession, resulting in overall lower internal in-migration flows. As a result, total housing need in the district over the 2013-28 period is expected to be much lower at around 9,400 dwellings or 625 dwellings per annum. This is 288 dwellings short of the requirements identified by the DCLG-based projections, and would result in around 9,200 fewer people over the 2013-28 period.

3

Table 1.3 Projections based on short-term (2010-15) and long-term (2004-15) migration trends, 2013-28

Short term migration

Long term migration

Population increase 23,100 14,700

% increase in population 15.1% 9.6%

Household increase 12,600 9,100

% increase in households 19.5% 14.1%

Additional dwellings (2013-28) 12,900 9,400

Dwellings per annum 862 625

Source: Regeneris Consulting Ltd modelling using POPGROUP based on DCLG, Sub-National Household Projections, 2014; ONS, Sub-National Population Projections, 2014; ONS, Mid-Year Population Estimates, Components of Change, 2004-15

Please note: total figures are rounded to the nearest multiple of 100, annual figures are not rounded.

Economic Growth Adjustments

1.10 This section considers the potential scale of housing need within the Wealden District over the 2013-28 period, based on the following two economic forecasts:

• Experian Local Market Forecasts (from June 2016)

• Cambridge Econometric forecasts (from November 2016).

Employment Forecasts: 2013 to 2028

1.11 The table below gives an overview of the two forecasts used, and shows that annual employment change in Wealden between 2013 and 2028 is expected to be around 0.7% and 0.8% for the Cambridge Econometric and Experian forecasts respectively. These rates are similar to the annual growth in employment identified in the Wealden OAN Update paper from January 2017 (+0.7% per annum for both forecasts). That said, annual employment change over the 2013 to 2028 is expected to be higher (for both economic forecasts) than for the longer (2013-37) period. This means that overall employment growth over the 2013 to 2028 period is expected to be slightly faster than the average growth expected over the 2013 to 2037 period.

1.12 This is one of the instances where the Wealden OAN update from January 2017 and this note differ.

Table 1.4 Past and future employment in the Wealden District, 2003-13 & 2013-28

Total jobs (000s) Change 2003-13 Change 2008-13 Change 2013-28

'03 '08 '13 '28 pa. CAGR pa. CAGR pa. CAGR

CE 54.0 62.3 61.5 68.7 +752 +1.3% -157 -0.3% +479 +0.7%

Experian 48.7 51.9 51.3 57.8 +260 +0.5% -120 -0.2% +433 +0.8%

Source: Experian, UK Local Market Forecasts Quarterly, June 2016; Cambridge Econometrics Forecasts, November 2016

1.13 Despite the slight differences in the average annual employment growth figures, the drivers of growth in the district over the 2013 to 2028 period are expected to be similar to those identified in the January 2017 paper with construction, financial and business services, accommodation and food services as well as other services playing a key role over the 2013-28 period.

4

Housing Need Based on Economic Forecasts

1.14 The table below shows housing needs in the Wealden District based on the economic forecasts presented in Table 1.4. Our assessment of need uses the same assumptions as those in the January 2017 paper. Once again, the Experian Local Market Forecasts present the least optimistic view of housing need in the district, and the housing need figure based on these forecasts (ie. 876 dwellings per annum) is lower than the need identified by the starting demographic projections (ie. 913 dwellings per annum). On the other hand, housing need based on the Cambridge Econometrics forecasts (ie. 916 dwellings per annum) are in line with the need established by the 2014-based Sub-National Household Projections.

1.15 The table below shows that between 2013 and 2028, overall employment in the Wealden District is expected to grow by 6,200-6,800 jobs, resulting in an overall population growth of between 22,600-24,000 people, and the need for 13,100-13,700 additional dwellings.

Table 1.5 Housing need based on economic forecasts, 2013-28

` Cambridge

Econometrics Experian

Total jobs 6,800 6,200

Increase in labour force 7,500 6,700

% increase in labour force 9.9% 8.8%

Population increase 24,000 22,600

% increase in population 15.8% 14.8%

Household increase 13,400 12,800

% increase in households 20.8% 19.8%

Additional dwellings (2013-28) 13,700 13,100

Dwellings per annum 916 876

Source: Regeneris Consulting Ltd modelling using POPGROUP based on DCLG, Sub-National Household Projections, 2014; ONS, Sub-National Population Projections, 2014; ONS, Mid-Year Population Estimates, Components of Change, 2004-15; Experian Local Market Forecasts, June 2016; Cambridge Econometrics Forecasts, November 2016

Please note: total figures are rounded to the nearest multiple of 100, annual figures are not rounded.

Market Signals Evidence

1.16 As part of the Wealden OAN Update paper from January 2017, we have also looked at market signals evidence, and tested a couple of adjustments that could be applied to the OAN figures presented above.

1.17 This assessment built on the evidence presented in the Wealden SHMA1 which suggests that the housing market in the Wealden District is experiencing a level of stress resulting from high demand and insufficient supply, and that this is apparent from rents and levels of affordability (including house prices). Despite that, the SHMA suggests that the evidence presented does not warrant a significant increase in the district’s OAN based purely on household projections. However, it points out that the use of the economic scenarios increases the district’s OAN by 11.5% and argues that this addresses affordability issues within the district.

1.18 The OAN Update paper tested this rationale, and suggested that an upward adjustment may however be considered appropriate to account for reduced affordability.

5

An Appropriate Market Signals Adjustment

1.19 As per the Wealden OAN Update, we start our assessment of an appropriate market signals adjustment by testing the implications of applying an uplift to the starting (demographic) projection. An adjustment of 10% applied to the starting projection, would imply an additional 91 dwellings per annum to account for affordability issues in the Wealden District, resulting in an implied housing need of 1,005 dwellings per annum (or 15,100 dwellings over 2013-28).

Table 1.6 Market signals adjustment for starting projection based on 10% uplift

Starting point projection 913

10% flat rate uplift 91

OAN for Wealden District (dwellings per annum) 1,005

Total dwellings (2013-28) 15,100

Source: Regeneris Consulting Ltd modelling using POPGROUP based on DCLG, Sub-National Household Projections, 2014; ONS, Sub-National Population Projections, 2014; ONS, Mid-Year Population Estimates, Components of Change, 2004-15

Please note: total figures are rounded to the nearest multiple of 100, annual figures are not rounded.

1.20 Another market signals adjustment can be made by testing the implications of applying a form of recovery to household formation rates, especially to those age groups which have either seen suppressed household formation rates for an extended period and/or where these are projected to fall substantially over the plan period.

1.21 This note makes an adjustment to household formation rates for people aged 25 to 44-years, similar to that used in the Wealden OAN update paper. In the January 2017 paper, household formation rates for 25 to 44-year olds were assumed to recover to the levels at which they stood in 2001 by the end of the plan period (ie. 2037). When re-running market signals adjustments to household formation rates for this note’s shorter time period, we considered whether a change in the recovery period would be appropriate.

1.22 Unfortunately official guidance does not make recommendations as to the period over which any adjustments to household formation rates should be considered. Whilst recovery to 2001 figures by 2037 seems too slow in the context of the 2013-28 time period, a full recovery to 2001 figures by 2028 seems to be too fast. To help with our decision over which period this recovery should occur we looked at the guidance proposed by the Local Plans Expert Group3 (LPEG). This recommends using the 2008-based projections to track the mid-point between this and the 2014-based household formation rates to 2033, after which the annual rate of change from the latest projections (ie. 2014-based) should be used.

1.23 Whilst we still consider the 2008-based rates to be based on over-inflated population and household estimates, we feel that there is a merit in using the recovery period suggested by the LPEG method. As such, in this note we test the implications of headship rates (for 25 to 44 year-olds) recovering to 2001 figures by 2033 (a period recommended by LPEG).

1.24 The table below shows the implications of making adjustments to household formation rates for the 25 to 44-year old age cohorts, based on a return to conditions similar to those in 2001. This adjustment is applied on top of the starting projection, as well as the employment-led projections. Table 1.7 shows that a change in household formation rates would result in a requirement for between 54 and 56 additional dwellings per annum, representing an uplift of just over 6%.

3 Local Plans Expert Group, Report to the Communities Secretary and to the Minister of Housing and Planning, March 2016

6

1.25 Yet again, household need based on the Experian Local Market Forecasts remains lower than the household need identified by the starting (demographic) projection.

Table 1.7 Market signals adjustment based on headship rate variations

SNPP 2014 Cambridge

Econometrics Experian

Additional dwellings (2013-28) 13,700 13,700 13,100

Dwellings per annum 913 916 876

Uplift - HR variations for 25-44 year olds 55 56 54

% uplift 6.0% 6.1% 6.2%

OAN for Wealden District (dwellings per annum) 968 972 930

Total dwellings (2013-28) 14,500 14,600 13,900

Source: Regeneris Consulting Ltd modelling using POPGROUP based on DCLG, Sub-National Household Projections, 2014; ONS, Sub-National Population Projections, 2014; ONS, Mid-Year Population Estimates, Components of Change, 2004-15; Experian Local Market Forecasts, June 2016; Cambridge Econometrics Forecasts, November 2016

Please note: total figures are rounded to the nearest multiple of 100, annual figures are not rounded.

LPEG Method

1.26 In the Wealden OAN Update paper from January 2017, we tested the implications of identifying housing need for the Wealden District based on the method proposed by LPEG3 as set out in Appendix 6 of its Report to the Communities Secretary and to the Minister of Housing and Planning published in March 2016.

OAN for Wealden District

1.27 Based on the approach set out in the January 2017 paper, we calculate Wealden’s OAN figure as being 1,233 dwellings per annum (or 18,500 dwellings over 2013-28).

Table 1.8 Objectively assessed housing need for the Wealden District based on LPEG method

Step A - Demographic Starting Point

Official projections – average annual households (2013-28) 892

Household formation rate adjustments (25-44 year olds) +71

Vacancy rate in the Wealden District 2.4%*

Vacant dwellings +23

Output A 986

Step B - Market Signals

House price affordability ratio 11.5**

Rental affordability ratio 41%***

Uplift based on rental affordability ratio 25%

Market signals uplift +247

Output B 1,233

Step C - Affordable

Housing Need

Affordable housing need 331±

Proportion of housing (net) which should be affordable 35%±±

Output C 946

Step D - FOAHN

Output D – Dwellings per annum 1,233

Output D – Dwellings over reviewed period (2013-28) 18,500

Source: Calculations by Regeneris Consulting, 2017

* Based on average Council Tax Bae data from DCLG for 2013 to 2015

** Average based on median quartile house prices to median earnings from DCLG for 2013 to 2015

*** Average based on lower quartile rents data from VOA and lower quartile earnings from ASHE for 2013 to 2015

± Affordable housing need as identified in the Wealden District SHMA – para. 7.66

7

±± Proportion of (net) net housing which should be affordable as identified in the Issues, Options and Recommendations Consultation paper under Preferred Option for Testing 3.

Please note: total figures are rounded to the nearest multiple of 100, annual figures are not rounded.

An Alternative OAN for Wealden – based on long-term migration

1.28 As per the January 2017, we were also asked to test the implications of using the LEPG method based on long-term migration (instead of the 2014-based SNPP which returns a higher starting position – 892 households per annum vs 635 households per annum). Using the same approach as that set out in the January 2017 paper, we calculate Wealden’s housing needs to be 946 dwellings per annum, (or 14,200 dwellings over 2013-28).

Table 1.9 Housing need for Wealden District based on LPEG method using long-term migration trends as starting point

Step A - Demographic Starting Point

Official projections – average annual households (2013-28) 635

Household formation rate adjustments (25-44 year olds) +70

Vacancy rate in the Wealden District 2.4%*

Vacant dwellings +17

Output A 721

Step B - Market Signals

House price affordability ratio 11.5**

Rental affordability ratio 41%***

Uplift based on rental affordability ratio 25%

Market signals uplift +180

Output B 902

Step C - Affordable

Housing Need

Affordable housing need 331±

Proportion of housing (net) which should be affordable 35%±±

Output C 946

Test: If Output C > Output B, then apply 10% uplift to Output B, or meet Output C in full if lower

Step D - FOAHN

10% uplift to Output B +90

Output B + 10% uplift 992

Output D – Dwellings per annum 946

Output D – Dwellings over reviewed period (2013-28) 14,200

Source: Calculations by Regeneris Consulting, 2017

* Based on average Council Tax Bae data from DCLG for 2013 to 2015

** Average based on median quartile house prices to median earnings from DCLG for 2013 to 2015

*** Average based on lower quartile rents data from VOA and lower quartile earnings from ASHE for 2013 to 2015

± Affordable housing need as identified in the Wealden District SHMA – para. 7.66

±± Proportion of (net) net housing which should be affordable as identified in the Issues, Options and Recommendations Consultation paper under Preferred Option for Testing 3.

Please note: total figures are rounded to the nearest multiple of 100, annual figures are not rounded.

8

Conclusion

1.29 This note tests the implications of establishing the objectively assessed housing need (OAN) for the Wealden District for a period shorter than that identified in the recently-published Wealden OAN Update (from January 2017). Most of the assumptions used to inform this assessment have remained unchanged, with a different projection period (2013 to 2028), instead of the proposed plan period (2013 to 2037) being the main difference.

1.30 The table below outlines the different outputs for housing need in the Wealden District between 2013 and 2028, based on a demographic starting point, economic forecasts, an assessment of market signals uplift and the method proposed by the Local Plans Expert Group4.

Table 1.10 OAN for Wealden District, 2013 to 2028

Total Dwellings (2013-28)

Dwellings per Annum

Demographic Projections

Starting point projection 13,700 913

Long-term migration trends 9,400 625

Short-term migration trends 12,900 862

Economic Forecasts Cambridge Econometrics 13,700 916

Experian Local Market Forecasts 13,100 876

OAN for Wealden District (following market signals adjustments)

10% uplift Demographic 15,100 1,005

Household Formation Rates return to 2001 conditions

Demographic 14,500 968

Cambridge Econometrics 14,600 972

Experian Local Market Forecasts 13,900 930

LPEG method Based on SNPP 2014 (as per LPEG) 18,500 1,233

Based on long-term migration 14,200 946

Source: Regeneris Consulting Ltd modelling using POPGROUP based on DCLG, Sub-National Household Projections, 2014; ONS, Sub-National Population Projections, 2014; ONS, Mid-Year Population Estimates, Components of Change, 2004-15; Experian Local Market Forecasts, June 2016; Cambridge Econometrics Forecasts, November 2016; Local Plans Expert Group, Report to the Communities Secretary and to the Minister of Housing and Planning, March 2016

1.31 Please note: total figures are rounded to the nearest multiple of 100, annual figures are not rounded.

4 Please note that in this note we have not tested the implications associated with a declining commuting ratio. As shown in the Wealden OAN Update report, a declining commuting ratio (from 1.27 in 2013 to 1.22 by 2025) would result in demand for housing to decline by around three dwellings (in total) between 2013 and 2037. The report we considers this to be negligible and argues that a fall in the commuting ratio would bring Wealden’s OAN in line with the housing need set by the starting demographic population projection (ie. 879 dwellings per annum over the full plan period between 2013 and 2037).

Regeneris Consulting Ltd Manchester Office 4th Floor Faulkner House Faulkner Street, Manchester M1 4DY 0161 234 9910 manchester@regeneris.co.uk London Office 3rd Floor, 65 St. John’s Street. London EC1M 4AN 0207 336 6188 london@regeneris.co.uk

www.regeneris.co.uk