The Housing Land Numbers Game

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This post is relevant to those of you facing housing applications for large scale housing projects. But we would like to hear from planners about what they think of this situation. Its something we hope won’t be relevant after the NPF4 has been published if the rules of the game change. Thanks to one of our housing mentors Alistair for the explanation below.

See our latest news article for an update on the Kilmacolm saga, which has tested the community to the extreme and demonstrates just how hard it is to stop lucrative greenfield sites from being developed, when developers are able to game the system.

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Communities faced with unwelcome and unexpected planning proposals should be alert to the possibility that the developers are stretching the interpretations of housing land requirements and effective land supply to their limits to favour their proposals and it may be possible successfully to challenge the assumptions that the developers are using. Planning Democracy mentors can help guide you through this process. The following is a brief introduction to the numbers game played by developers.

As explained in previous blogs Scottish Planning Policy [SPP] requires that planning authorities “…ensure a generous supply of land for house building is maintained and there is always enough effective land for at least five years” (paragraph 123).

There are two ways in which to calculate the target five-year housing land requirement (HLR); the “average” method and the “compound” or “residual” method. Without going into the detail of the calculations it is sufficient to be aware that, under normal circumstances, the compound method tends to produce a higher five-year HLR than the average method and that the difference between the results produced tends to increase over the life of the development plan. Current Scottish Planning Policy (para 110 onwards) does not specify which method is to be used and the Court of Session has stated that either method is capable of being supported[1].

There are also two ways of calculating the effective housing land supply. One is to assess the planning authority’s land supply to see which sites or parts of sites are free from development constraints and, therefore, can be developed. I will refer to this as the “unrestricted” approach. There are seven different criteria[2] used to determine whether a site is effective. These are set out in detail in Planning Advice Note PAN 2/2010 (Para 55) and are mostly capable of objective assessment but also include whether, subjectively, the site is “marketable”. Planning authorities assess the land supply annually in a housing land “audit” and classify sites as effective or non-effective.

Another facet of the housing land audit is the “programming” of completions that are expected to take place over the next 5-7 years (different planning authorities have different practices for no obvious reason). It is argued by some that only sites that have output programmed for completion over the following five years can be considered to be “marketable” and, thus, be free of development constraints. I will refer to this as the “restricted” approach.

What does all this mean in practice, and why is it important? The simple answer is that developers who wish to propose housing sites that are not currently in the housing land supply and which are inconsistent with the local development plan frequently argue that there is a shortage of housing land that their proposal could alleviate, basing their calculations on the most generous possible interpretation of the five-year HLR and the most restrictive view of the current effective housing land supply. If such a “shortage” can be demonstrated then it is very difficult for planning authorities to refuse planning permission even on highly sensitive green belt sites.

As an illustration of the difference that the range of methodologies used can make, the possible outcomes for the Inverclyde Council Area (all tenures) based on the 2021 Housing Land Audit are shown below:

Table 1Compound/Residual MethodAverage Method
5-year Housing Land Requirement (units)2,7671,490

There is a very significant difference between the two bases. This is partly because, after 9 years of completions below the HLR, a considerable backlog has built up and, under the compound basis, this backlog must be made up over the remaining 8 years of the plan.

Table 2Restricted BasisUnrestricted Basis
Effective Housing Land Supply (units)1,4892,655

Here, too, there is a very significant difference in the answers that the two possible bases provide. Because the restricted basis only considers completions that are expected to occur over the next five years rather than the completions that could, if necessary, occur from the effective supply.

Table 3: Surplus/(Deficit) of Housing Land Using Different Methodologies (Units)

As can be seen from Table 3, Inverclyde either has a surplus of housing land of 1,165 units (using the average method of calculating the 5-year requirement and the unrestricted supply) or a deficit of 1,278 units (using the combination of the compound method of calculating the five-year requirement and the restricted supply), or somewhere in between.

To do  justice to the Scottish Government, it did clarify its preferred methodologies for these calculations in its amendments to SPP that were introduced in December 2020. Regrettably, however, those amendments were challenged in the Court of Session and quashed on a technicality taking us back to square one. This muddle will, therefore, persist until the new National Planning Framework 4 (NPF 4) comes into force to replace the present SPP and planning authorities draw up development plans under the new arrangements. It is likely, therefore, that uncertainty will prevail for some years yet. Indeed, it may persist in part beyond that point because the draft NPF4 simply re-brands “effective land” as “deliverable land” but uses identical criteria.

Developers who are concerned that NPF4 may make it harder for them to bring forward unsustainable green field sites in future are likely to take advantage of the current potentially favourable (to them) opportunity to play the numbers game while it lasts.

[1] Mactaggart & Mickel Homes Ltd and others against Inverclyde Council and Scottish Ministers [2020] CSIH 44

XA108/19 – see paragraph 60

[2] The seven criteria (potential constraints) are: ownership, physical, contamination, deficit funding, marketability, infrastructure and land use.

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