The government has introduced a revised formula for assessing local housing need (LHN), altering the standard method used by councils to determine their housing targets. This change is expected to leave many authorities struggling to demonstrate a five-year housing land supply, thereby exposing them to speculative development applications.
What Has Changed?
On 12 December 2024, the government published the final version of the updated National Planning Policy Framework (NPPF), refining the standard method formula used to calculate LHN. The revised formula places greater weight on affordability, significantly increasing housing need figures in areas where housing costs are highest. The new total housing need figure stands at 370,408 homes per year, a marginal decrease from the draft proposal (371,541 homes), yet a substantial increase from the previous method’s 305,223 homes per year.
The updated approach includes:
A stronger affordability adjustment, nearly four times as strong as the previous formula.
A threshold increase for affordability calculations, affecting areas where house prices are at least five times median earnings, compared to four times previously.
A shift in earnings data calculation from a three-year to a five-year average, adding stability to the projections.
The retention of the proposal to base housing need figures on a district’s existing housing stock rather than population projections.
Impacts on Local Authorities
The revised standard method presents significant challenges for councils, especially those without an up-to-date Local Plan. As soon as the NPPF was published, the new formula took effect for decision-making and five-year housing land supply calculations, placing many authorities in a weaker planning position.
For example:
Buckinghamshire Council saw its land supply drop from five years to 2.5 years overnight, leading to automatic exposure to the ‘presumption in favour of sustainable development.’
Wiltshire Council is pushing to approve its Local Plan by late 2025, but will immediately need to review it to accommodate the new targets.
With an increasing number of councils unable to demonstrate a five-year supply, developers are likely to pursue more speculative applications. Without an adopted plan reflecting the new targets, local planning policies may carry less weight in determining applications, leading to more appeals and uncertainty.
Development Industry Response
The development sector is already preparing for a surge in planning applications:
Land promoters and developers are eyeing sites not currently allocated in Local Plans, with many expected to submit applications before plans are updated to reflect the new targets.
The Home Builders Federation (HBF) anticipates an increase in speculative applications, particularly in areas where councils are unable to meet the revised five-year housing land supply.
Planning inspectors will now play a key role in determining the weight given to the new housing figures when considering appeals.
Looking Ahead
While the government has sought to address concerns raised by northern and Midlands councils, the changes still pose a substantial challenge for planning authorities across England. In the short term, many councils are at risk of losing control over their housing delivery strategy until updated Local Plans are in place.
This transition period is expected to be a critical time for landowners, developers, and councils alike, as they navigate the evolving policy landscape. Given the heightened risk of speculative development, local authorities will need to act swiftly to adapt their planning policies to align with the new framework.
For further details, read the official government statement here.
If you have land which might be suitable for development, please get in touch for a free site appraisal.
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