Local Housing Need Assessment Reform

Damian Hinds Excerpts

Tuesday 13th May 2025 Westminster Hall

[Damian Hinds (East Hampshire) (Con)]

Mrs Hobhouse, it is a great pleasure to see you in the Chair—I think, in my case, for the first time. I congratulate the hon. Member for Horsham (John Milne) on securing the debate and bringing us together to discuss this important matter.

It is very good to see this Minister in his place. I thank him and his Ministry of Housing, Communities and Local Government colleagues for their engagement on these issues. I have been in this place on more than one occasion to talk about related issues, including about how national parks work relative to local authority planning areas. I am grateful to his colleague the Minister for Housing and Planning for also meeting me separately as well as corresponding. Today, I am going to talk not about those issues, but about the algorithm overall and how it works and, in particular, about the affordability ratio and how it works—or, more correctly, does not work.

We know that the Government are looking for a big uplift—a 50% increase—in the number of housing completions, but in areas such as mine in Horsham, the increase is much greater than that. In my local planning area the target is up from 575—already a pretty punchy annual target—to more than 1,100, which is effectively a doubling. It is not a north/south thing, it is a rural/urban thing. Rural areas throughout the country have some of the biggest increases, such as in the rural far north-west and far north-east. There have been really big increases in the target, and at the same time major conurbations are seeing much lower increases in their numbers—typically 16% or 17%. Some places, including parts of London and Birmingham, are actually seeing the numbers go down at a time when we are trying to build many more homes. Sometimes it is thought that this is correcting a historical imbalance—that homes have not been built in the countryside for all these years—but that is not the case. Proportionately over the last couple of decades, in the rate of additions of homes per 1,000 existing dwellings, the predominantly rural areas have seen a greater build-out rate than predominantly urban areas.

I do understand that the Government need a formula—the 0.8% of housing stock multiplied by the five-year average affordability ratio, minus five, divided by five, multiplied by 0.95, plus one. It looks okay. Trust me: it looks logical if we break it down, but the truth is that in practice, it is not working. It is not delivering what all of us want to see, or what the Government want to see, which is a material, sustainable increase in housing stock in the places where people need it.

The affordability formula matters so much more now because of that 0.95. It used to be 0.6, but since it has gone up, it has made the affordability ratio do that much more work. There are multiple aspects to query, such as whether to use workplace-based earnings or residency-based earnings. I think both of those things are relevant, and a comprehensive formula would probably use both. Whether earnings or income is used makes a difference, because it means capturing only the working population or the retired population as well. Crucially, the formula lumps all types of housing together, so it does not distinguish between the cost of a starter home and a two-bedroom flat, a one-bedroom flat or a three-bedroom house in these different places.

Echoing what we heard from the hon. Member for Horsham, I have lots of people coming to my surgery who are unable to afford a home; probably everybody in this room has lots of people coming to their surgery in the same position. Some of those people are looking for social housing and there is a shortage of that, but when most people come to our surgeries and talk about the unaffordability of homes, they mean the affordability of a home they can buy—a decision that, I am guessing, most of us made at some point in our 30s or 40s. However, many more homes get built every year and I still get the same number of people coming to my surgery saying that they cannot afford to get on the housing ladder.

We want there to be more affordable homes in both senses, both the public sector sense, in what I call “capital A” affordable—social rent, part-ownership and all that—and for young couples and young families to be able to buy a home and invest in their security and that of their children. But the problem is that, other things being equal, the best returns for developers are on larger, five-bedroom or four-bedroom executive homes in large plots of land outside of town centres, which are very aspirational homes for people to buy. Although there is nothing wrong with that, it does not address the needs of the people coming to our surgeries saying that they cannot afford to get on the housing ladder. Therefore, because we have high unaffordability ratios, we get lots more houses being built but they tend to be five-bedroom, four-bedroom executive homes disproportionately. That makes the area even more unaffordable on average, because the average price of a new build house is greater than the median price of the existing housing stock, so over time the formula ratchets up the price. It just says, “However many more homes you build, you will need to build more and more.” Honestly—there is no mathematical logic to it. We should be trying to address the actual need.

I ask Ministers to look again at the formula, not to get rid of it but to change it. Development targets must be sustainable and reasonable in different areas of the country, and crucially they must target the addition of homes that people can afford to buy, so that over time affordability ratios improve.

--- Later in debate ---

[Martin Wrigley (Newton Abbot) (LD)]

It is a pleasure to serve under your chairship, Mrs Hobhouse. I congratulate my hon. Friend the Member for Horsham (John Milne) on securing this debate, and hon. Members from across the House on their excellent contributions. I draw attention to my entry in the Register of Members’ Financial Interests; I am still a sitting councillor at Teignbridge district council.

The Liberal Democrats support housing targets, but believe we need to win the case for that housing within the communities we represent, and that enforcing them from Whitehall without community consent will continue to fail to deliver the homes we need. Homes must be built to meet local need and not be driven simply by developers seeking the highest profits. Development has brilliant potential for providing a wealth of opportunities to rural communities, but that can be realised only by genuinely involving those communities in the decisions that affect them. That means the right houses in the right places.

The Liberal Democrats welcome the Government’s decision to make housing a priority, given the desperate number of people denied the basic right to a safe and warm home. The Conservatives’ poor commitment to house building has left 8.5 million people in England with unmet housing need. The Conservatives let developers get away with building housing to poor standards, and without GP practices, schools and community infrastructure, which are badly needed. They also let them off the hook for leaving land for housing unbuilt and new homes empty. We believe everyone has a right to a safe and secure home, but without more support for councils, more people will be left without access to quality and affordable housing. The previous Conservative Government forced councils to do more and more with less and less, plunging many into financial crisis.

Although we have welcomed this Government’s commitment to our call for multi-year funding settlements, with additional pressure on councils to accept national insurance contribution changes, it is essential that they are funded robustly to achieve those aims.

We have been disappointed by the Government’s reluctance to commit to a target for social house building. In addition to an overall target for new homes, the Liberal Democrats would target 150,000 new social homes to tackle the housing shortage and homelessness crisis. We are committed to ensuring that house building does not come at the expense of our environment. The Government should not be either delivering house building or protecting our environment; they can and must do both.

We welcomed the Government’s recent announcement that they are adopting the Liberal Democrat policy and wording mandating all homes to be built with solar panels, in a solar rooftop revolution. We also welcome the measures in the Renters’ Rights Bill to ban no-fault evictions and create a national register of licensed landlords. We believe that these steps are crucial to overcoming the housing crisis. Liberal Democrats have long called for leasehold reform to make house ownership fairer and more accessible—we have been campaigning against leasehold since Lloyd George introduced the people’s Budget.

On the specifics of the standard method, I agree with my hon. Friend the Member for Horsham, who pointed out that it does not and cannot work—as did the right hon. Member for, I believe, the Isle of Wight.

[Damian Hinds]

Well, I have been there, but I represent East Hampshire.

[Martin Wrigley]

My apologies to the right hon. Member.

Since 2018, when the Conservative Government introduced the so-called standard method, which was supposed to calculate housing need, the country has suffered from a top-down, dysfunctional system that fails to prioritise the importance of affordability or the infrastructure necessary to support new development. The constant tinkering, with the introduction and subsequent withdrawal of various failed algorithms, has led to the near paralysis of our planning system. That came on top of the central Government’s starving local planning authorities of the resources they need to function, and the lack of direction as a result of no fewer than 13 changes of Conservative Housing Minister in the nine years from 2015.

It is illiberal, and contrary to the interests of a community-led planning system, to remove options for how to assess housing need from local communities. Although the standard method of assessing housing need is likely to be followed by most authorities, councils with the resources and ability to assess housing need in ways more suited to their areas should be permitted to do so. All housing need assessments are, in any event, subject to the same scrutiny by the Government’s inspectors.

In the district of Teignbridge, in which my Newton Abbot constituency sits, the average house price in 2019 was just under 11 times the average income. After a substantial increase in housing targets due to the standard method calculations, that ratio is going up, and the average house price is now over 11 times the average income. Housing developers build homes only as fast as they can sell them and at the price they need to protect their profit and viability, given the often extortionate prices they have paid for the land. Asking them, via the flawed standard method, to build more to reduce the price is much like asking the owner of a gold mine to increase extraction to a level that reduces the price of gold. It will not happen.

A big part of the solution is to build more council homes, and I am proud to have overseen the resumption of council house building at Teignbridge for the first time in 30 years. I urge the Government to help more councils build more council homes to help more people.