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Annex A - Strategic Housing Need and Market Assessment guidance
Introduction
1. The Strategic Housing Need and Market Assessment guidance sets out a framework that local authorities should follow to develop a good understanding of how housing markets operate. As set out in Section 1 of SPP3, the accurate assessment of future housing requirements forms the basis of local authority housing strategies and housing allocations in land-use plans.
2. The guidance provides a step by step approach to assessing housing need and demand that is relevant at the regional and local level, which will ensure greater consistency and a more robust approach to the assessment of requirements across all tenures. It supersedes DETR good practice guidance published in 2000 and should be read in conjunction with the Local Housing System Analysis Good Practice Guide, which continues to provide a framework for identifying, addressing and monitoring imbalances in the local housing system over time. 5
3. This annex provides an overview of the key principles of the guidance, and emphasises links between SPP3 and the guidance. This annex is not a substitute for the full guidance, which should be consulted when undertaking strategic housing need and market assessments. Strategic housing need and market assessment guidance will be a material consideration for the purpose of planning appeals.
4. The value of strategic housing need and market assessments is in assisting policy development, decision-making and resource-allocation processes by:
- enabling local authorities to develop long-term strategic views of housing need and demand to inform local housing strategies and development plans;
- enabling local authorities to think spatially about the nature and influence of the housing markets in respect to their local area;
- providing robust evidence to inform policies aimed at providing the right mix of housing across the whole market - both market and affordable housing;
- providing evidence to inform policies about the level of affordable housing required, including the need for different types and sizes of affordable housing;
- supporting local authorities to develop a strategic approach to housing through consideration of housing need and demand in all housing sectors - owner occupied, private rented and affordable - and assessment of the key drivers and relationships within the housing market;
- drawing together the bulk of the evidence required for local authorities to appraise strategic housing options including social housing allocation priorities, the role of intermediate housing products, stock renewal, conversion, demolition and transfer; and
- ensuring the most appropriate and cost-effective use of public funds.
Objectives
5. The key objectives of the Strategic Housing Need and Market Assessment guidance are:
- to provide clear and concise advice for practitioners on how to assess housing need and demand in their areas; and
- to enable local authorities and partners to gain a good appreciation of the characteristics of housing market areas and how they function.
Functional housing markets
6. On the basis of the identified housing market areas, the guidance encourages constituent local authorities to set up a housing market partnership and undertake strategic housing need and market assessments together. Functional housing markets are defined as 'the geographical area within which most people both live and work and where most people moving home (without changing job) will have sought a house'. 6 Housing market partnerships should involve local authority housing, planning, economic development and regeneration interests, and should also involve external interests, such as Registered Social Landlords, house builders, estate and/or letting agents and private landlords. Housing market partnerships are discussed in more detail in Chapter 2 of the guidance.
Assessment framework
7. The guidance sets out an assessment framework that can be used to obtain the key evidence required for planning and housing policy development. The key issues that should be assessed include:
- the balance between housing supply and demand/need;
- the scale of need and demand for affordable and market housing;
- the extent to which affordability is an issue; and
- the extent to which low demand is an issue.
Strategic housing need and market assessment should also address any relevant local or regional issues.
Robust and credible assessments
8. The guidance states that strategic housing need and market assessments should be considered robust and credible if as a minimum, they provide all of the core outputs and meet all the requirements of the process criteria in the following checklists:
| Strategic housing need and market assessment core outputs |
1 | Estimates of current dwellings in terms of size, type, condition, tenure |
2 | Analysis of past and current housing market trends, including balance between supply and demand in different housing sectors and price/affordability. Description of key drivers underpinning the housing market. |
3 | Estimate of total future number of households |
4 | Estimate of current number of households in housing need |
5 | Estimate of future households that will require affordable housing |
6 | Estimate of future households requiring market housing |
7 | Estimate of the size of affordable housing required |
8 | Estimate of household groups who have particular housing requirements eg, families, older people, black and minority ethnic groups, disabled people, young people, etc. |
| Strategic housing need and market assessment process checklist |
1 | Approach to identifying housing market area(s) is consistent with other approaches to identifying housing market areas |
2 | Housing market conditions are assessed within the context of the housing market area |
3 | Involves key stakeholders, including Registered Social Landlords and house builders |
4 | Contains a full technical explanation of the methods employed, with any limitations noted |
5 | Assumptions, judgements and findings are fully justified and presented in an open and transparent manner |
6 | Uses and reports upon effective quality control mechanisms |
7 | Explains how the assessment's findings have or will be monitored and updated (where appropriate) |
The current housing market
9. Partnerships should carry out an assessment of the current situation in housing market areas. The assessment of past trends and the relationship between different trends should improve understanding of the drivers underpinning housing markets and the reasons for the current situation. This will involve interpreting a range of quantitative data including house prices, demographic factors, labour force structure and the characteristics of the housing stock.
10. The stages involved in this process are:
- Stage 1 - The demographic and economic context
- Stage 2 - The housing stock
- Stage 3 - The active market
- Stage 4 - Bringing the evidence together
11. Chapter 3 of the guidance provides detailed discussion of these steps. Based on these steps, partnerships should be able to produce estimates of current dwellings in terms of size, type, condition and tenure; an analysis of past and current housing market trends, including the balance between supply and demand in different housing sectors and prices/affordability; and a description of the key drivers underpinning the housing market.
The future housing market
12. Building on the assessment of the current housing market, partnerships should carry out assessments of the future housing market to consider how the current drivers of housing markets could shape changes in housing demand. Partnerships should consider such issues as how the total number of households and household structure might change in the future, how economic factors might influence future demand, whether affordability is likely to worsen or improve, as well as examining the key issues for future policy/strategy.
13. The steps involved in this process are:
- Step 1 - Projecting changes in future number of households
- Step 2 - Future economic performance
- Step 3 - Future affordability
- Step 4 - Bringing the evidence together
14. Chapter 4 of the guidance provides detailed discussion of these steps. Based on these steps, partnerships should be able to produce estimates of the total future number of households.
Housing need
15. Partnerships should estimate the number of current and future households in housing need, and consider the available stock and demand from existing affordable housing tenants for different sizes of properties. This will provide an evidence base that can inform decisions about a range of policy responses to housing need.
16. The stages involved in this process are:
Stage 1 - Current housing need
Stage 2 - Future housing need
Stage 3 - Affordable housing supply
Stage 4 - Housing requirements of households in need
Stage 5 - Bringing the evidence together
17. Chapter 5 of the guidance provides detailed discussion of these steps. Based on these steps, partnerships should be able to produce estimates of the current number of households in housing need, future households requiring affordable housing, future households requiring market housing and the amount of affordable housing required.
Housing requirements of specific groups
18. Partnerships should consider the need to gather information about the housing requirements of specific groups. Unlike previous chapters of the guidance, Chapter 6 does not set out a step-by-step approach, since partnerships will need to select the analyses most suited to local circumstances. Instead, this chapter outlines some of the issues and approaches that partnerships may wish to consider with respect to families, older people, minority and hard to reach households, and households with specific needs. Partnerships may also wish to consider demand for low cost market housing and other forms of affordable housing.
Monitoring and updating strategic housing need and market assessments
19. The guidance also provides advice on how the findings of assessments should be monitored and updated on a regular basis. Partnerships should not need to undertake comprehensive assessment exercises more than every five years, however the evidence base should be updated regularly. In particular, the number of households that have need and demand for housing, and movements between tenures, including through the right to buy, may need to be revised frequently.
Development planning for housing policies
20. The guidance highlights that planning authorities should take into account the findings of strategic housing need and market assessments when determining housing provision figures and the right mix of housing. This will require planning authorities to consider how the overall number of household types (both existing and future) translates into demand for market housing and need for affordable housing across the development plan area over the plan period.
21. In terms of developing affordable housing targets for incorporation within development plans, the framework will be provided by the local housing strategy. In addition, as PAN 74 explains, planning authorities will need to consider other factors when determining affordable housing targets including an assessment of land values, the requirement for developers to make a contribution to infrastructure and supporting development and the availability of public funding to support the provision of affordable housing.
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