Comment

How does new affordability data affect the standard method of assessing housing need?

The Office for National Statistics this morning released new affordability ratios, which measure the relationship between house prices and earnings as of 2020.

These ratios are a critical part of the standard method of assessing housing need in England, guiding the level of adjustment applied to the baseline before the cap is applied and a further uplift is made in England’s largest towns and cities.

The requirement to use the ‘most recent’ ratios when applying the method means that the majority of areas see a change in the minimum housing need implied by the formula, even if this is only slight in most cases. Nearly half (46%) of authorities see reductions, of 2% on average, with West Devon seeing the largest fall (8%). Circa 29% of authorities see increases, again of 2% on average, with Fareham seeing the most pronounced increase of 6%. One quarter of authorities see no change, mainly because the effect of a new affordability ratio is offset by the 40% cap.

Together, these changes mean that there is now an implied national need for 297,379 homes each year, a fraction lower (0.6%) than the method suggested before the new ratios were released.

Up-to-date figures for every local authority can be found in the latest version of our summary document, produced in collaboration with the Land Promoters and Developers Federation and available to download below.

For more information please contact Andrew Lowe or Antony Pollard.

25 March 2021