Lancaster City Council Independent Housing Requirements Study Interim Findings

Presented by Antony Pollard Director, Economic Planning Turley Associates

18 July 2013

Purpose of our presentation today

This study will help provide evidence of how many dwellings the Council needs to allocate in its Local Plan for development in the next 15 years

• Presentation outlining the scope of works, programme and interim findings of an independent housing requirements study • Obtaining your views and understanding of: – The proposed methodology / approach – Drivers of the housing market across Lancaster • Reflecting on your insights / experience from other areas

Scope of Works

Progression of a new Local Plan requires an NPPF compliant evidence base

• Complement existing evidence base – 2011 David Couttie Associates Housing Needs Survey – Recognise not an NPPF compliant assessment of full needs • Consider in detail the objectively assessed need for housing over the plan period: – Interpretation of ONS demographic projections – Recognition of the need to align policies around economic growth, regeneration and housing need • Assemble housing market evidence within a single document

“To boost significantly the supply of housing, local planning authorities should: - use their evidence base to ensure that their Local Plan meets the full, objectively assessed needs for market and affordable housing in the housing market area, as far as is consistent with the policies set out in this Framework, including identifying key sites which are critical to the delivery of the housing strategy over the plan period” NPPF, Paragraph 47

“Each local planning authority should ensure that the Local Plan is based on adequate, up-to-date and relevant evidence about the economic, social and environmental characteristics and prospects of the area. Local planning authorities should ensure that their assessment of and strategies for housing, employment and other uses are integrated, and that they take full account of relevant market and economic signals.” NPPF, Paragraph 158

“Local planning authorities should have a clear understanding of housing needs in their area. They should: - prepare a Strategic Housing Market Assessment (SHMA) to assess their full housing needs, working with neighbouring authorities where housing market areas cross administrative boundaries. The SHMA should identify the scale and mix of housing and the range of tenures that the local population is likely to need over the plan period which: - meets household and population projections, taking account of migration and demographic change; addresses the need for all types of housing… - caters for housing demand and the scale of housing supply necessary to meet this demand” NPPF, Paragraph 159

Research Challenges

Range of factors pose a challenge for the research process

• Complexity of the housing market – Multiple influences / drivers – Planning for the long-term: Using historical drivers to inform future projections • Absence of clear methodological guidance – Interpretation of the NPPF – Anticipated update to the SHMA Guidance following the Taylor Review • Range of valid assumptions – Baseline / policy-led • Range of perspectives / viewpoints

“ The aim is to establish this requirement through a comprehensive understanding of what is required to address demographic change. In doing so you also need to understand the implications of achievable economic potential in the area and how your population will change over time. It is important that an appropriate methodology which considers all the relevant information is undertaken at the right stage. This will ensure that policy issues are not included in the setting of the requirement. Supply, or a criteria based approach, must also not be confused with the requirement.” (Local Government Association / Planning Advisory Service, July 2013, ‘Ten key principles for owning your housing number – finding your objectively assessed needs’)

Our Approach

Our Methodology – Objectively Assessed Needs

Our Methodology – Objectively Assessed Needs

Our methodology – Other elements of the SHMA

Aligning and drawing together evidence to present a coherent SHMA

• Updating of affordable housing need indicators: – Market climate – Affordability ratios – New household formation rates – Role of the private rented sector • Understand implications for level of need for affordable housing identified in the DCA study • Specific housing needs: – Older person growth under population projections – Projected growth in different household types – Signposting to results of the needs survey and other research outputs

Understanding the drivers of the housing market

Spatial connections / Market Geographies

Absence of RSS re-emphasises importance of understanding market geographies

• Wealth of historic analysis / policy development • Key considerations: – Travel to work connections – Migration flows • Important to evidence duty-to-cooperate considerations – On-going policy discussions

National research on defining sub regional housing markets

NHPAU / DCLG Research project in 2010

• Recommended two tier approach: – ‘Strategic’ market area – ‘Local’ housing market areas • Lancaster identified as an independent strategic market area • Lower tier includes a split based on two main towns – Lancaster & Morecambe – Incorporates all wards in the district – Lancaster includes 1 ward in Wyre and 4 wards in Craven • Alternative ‘single-tier’ definition presented which groups ‘local authorities’ – Lancaster forms its own market area Local Market Areas Strategic Market Area

Commuting Dynamics

Relationship between home and work represents important linkage

• Census 2001 data showed high level of containment: – Commuting ratio of 1.06 (marginal exporter of labour) – 82% of people who lived in Lancaster worked in the authority • ONS published Annual Population Survey for 2010 and 2011 confirms high self-containment • Largest outward commuting flow to South Lakeland (2 – 4% of resident workers) • Largest inflows from Blackpool, Fylde, Wyre and South Lakeland • Small in commuting from range of other areas including Craven and Preston

UK migration flows – Spatial dynamics

Gross Flows – Average 2001 - 2011

Top Ten Inflows into Lancaster South Lakeland Wyre Preston Bradford Manchester Blackpool Leeds Bolton Wigan Craven Top Ten Outflows from Lancaster average 2001/02 2010/11 547 267 212 171 169 153 149 139 130 124 South Lakeland Wyre Manchester Preston Leeds Blackpool Bradford Bolton Craven Barrow-in-Furness average 2001/02 2010/11 445 290 236 213 186 153 144 106 101 100

UK migration flows – Spatial dynamics

Net Flows – Average 2001 - 2011

Top Ten inflows Top Ten outflows Burnley Craven Blackburn with… Bury Oldham Bradford Rochdale Wigan Bolton South Lakeland 0 Average Net Migration Average Net Migration 21 23 23 25 26 27 27 33 33 102 50 100 150 Average Net Migration 2001/02 - 2010/11 Manchester Leeds Wyre Sheffield Westminster Newcastle upon Tyne Wandsworth Tower Hamlets Oxford York -80 -67 -37 -23 -19 -18 -18 -17 -14 -14 -13 -60 -40 -20 Average Net Migration 2001/02 - 2010/11 0 • • Housing Need Survey revealed reasons given by those moving into the authority (including international migration): – To be near a relative / Better quality area / Better quality housing / closer easier to commute / Able to afford local housing / New job For those moving out family reasons and employment / access to work most strongly cited reasons

UK migration flows – Age of migrants

Strong inflow of ‘student’ population but marked loss of ‘graduates’

Age-group net flows 2000 1500 1000 500 0 -500 -1000 -1500 -2000

Demographic Trends

Lancaster has seen moderate growth in population and households

• ONS Census built mid year population estimates show: – Increase in population of 3,800 people between 2001 and 2011 • Latest 2012 estimate shows a population of almost 140,000 • The 2011 Census revealed that there were 57,822 households in Lancaster – Increase of almost 2,000 from 2001 – Lower than previous ONS estimate • 2013 Council tax shows 61,954 dwellings – 2,657 of these classified as empty homes (4.3%) – Approximately 59,300 occupied dwellings 141000 140000 139000 138000 137000 136000 135000 134000 133000 132000 131000 130000

Total Population Change 2001 - 2012

A changing age profile

Population change includes significant shift in age profile

• Notable increase in population aged 15 – 25 • Further ‘hollowing out’ of population aged 30 – 40 • General ageing of the population in line with England and Wales average

A Changing Population – Components of Change

Understanding the balance between births and deaths (natural change) and migration Components of Population Change Lancaster 2001 - 2012

2 1,5 1 0,5 0 -0,5 -1 Net Migration and other changes Natural Change

Economic Context

Demand for housing and the economy interlinked

• National agenda to stimulate economic recovery: – 2013 Comprehensive Spending Review (June) »

“recovery from such a deep recession can never be straightforward, Britain is moving out of intensive care - and from rescue to recovery”

– ‘The Plan for Growth’ (March 2011) » concern

country” “low levels of housing completions and limits on land supply also create barriers to mobility and high costs of entry for firms coming to the

– ‘Laying the Foundations: A Housing Strategy for England’ (November 2011) » Housing to play an important role in supporting rather than constraining economic recovery

Lancaster’s Economy

Impact of the recession not as significant as suggested 12 months ago. Increasing optimism from Experian forecasts around scale of recovery Contrasting Experian Quarterly Forecasts - Workforce Jobs

64 000 62 000 60 000 58 000 56 000 54 000 52 000 Apr-12 Jul-12 Oct-12 Jan-13 May-13

Economic Futures

Latest Experian forecasts predicts job growth of just over 4,000 jobs between 2011 and 2031 This does not take account of planned investment / policy aspirations

• Heysham Link Road • Supporting Nuclear and Renewables Investment – Heysham 3: 4,000 – 6,000 additional construction jobs / 400+ permanent jobs – Biomass / Grid investment • Regeneration of Morecambe

Market factors

Market operation manifested in a range of indicators. Important implication for historic change and future trends

• A changing housing stock • Market transactions and values • Vacancy

The provision of new housing

Net completions have reduced substantially over recent years Impact on population and household formation over this period Net Completions 2001 - 2013

600 500 400 300 200 100 0 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13

A changing stock profile

Growth in all property types Greatest proportionate increase in flatted properties

Household Spaces Detached Semi-detached Terraced Flat, Maisonette or Apartment Other 2001 10,603 22,198 15,815 9,811 430 Numbers 2011 11,067 22,678 16,128 10,544 525 Change 464 480 313 733 95 Proportion 2001 2011 18.0% 37.7% 18.2% 37.2% 26.9% 16.7% 0.7% 26.5% 17.3% 0.9%

A changing tenure profile

Fall in those owning with a mortgage Rise in Private renting

Tenure (Households) Owned Outright Owned with a Mortgage Shared Ownership Social Rented 2001 19,352 21,138 314 5,675 Private Rented (including living rent free) 9,360 Numbers 2011 20,890 19,109 367 5,762 Change 1,538 -2,029 53 87 11,694 2,334 Proportion 2001 34.7% 2011 36.1% 37.9% 0.6% 10.2% 33.0% 0.6% 10.0% 16.8% 20.2%

Reduced market activity

Significant reduction in levels of transactions – in line with national picture Indexed levels of transactions

1,80 1,60 1,40 1,20 1,00 0,80 0,60 0,40 0,20 0,00 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Lancaster Lancashire England

House price changes

Delayed period of strong growth 2003 – 2007 Stagnation 2007 - 2011 Indexed Median House Price Change

3,50 3,00 2,50 2,00 1,50 1,00 0,50 0,00 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Lancaster Lancashire England

Modelling future population and household growth

An appropriate range of scenarios

Scenarios selected to create an appropriate evidence based range

• Demographic projections: – Re-based 2010 Sub National Population Projection » 2011 Census age / sex profile » Application of last official ONS migration projections – average of approximately 800 in-migrants per annum (international migration) – Migration-led » Projects forward based on corrected (reduced) migration estimates » Migration levels almost balanced. » Lower levels of net international migration » Net internal out-migration still assumed – Natural Change » No migration assumption (illustrative only)

An appropriate range of scenarios

Assessing the impact of the economy

• Employment-led projections – Experian » Aligns population through a varying of migration to match forecast job growth of just over 4,000 jobs » Requires average in-migration of working age persons of approximately 800 per annum » Assumes continuation of 2001 evidenced commuting ratio but improvement to unemployment / economic activity rates – Experian – balanced commuting » Models assumption that every new job is taken by a resident in Lancaster » Effectively slightly reduces commuting rate

Range of Population Projections

Important differentiation between employment-led and recent trend based migration-led projections Projected Population Change 2011 - 2031 - Various Scenarios

160 000 155 000 150 000 145 000 140 000 135 000 130 000 125 000 SNPP-2010 Migration-led Natural Change Employment-led (Experian) Employment-led Balanced Commuting

Translating population into households

Population converted into households through the application of headship rates by age and sex

• Currently two sets of ONS produced headship rates: – 2008 Sub National Household Projections (2010) » Project rapid fall in household sizes driven by single / couple households » Reflective of positive market context at the time – Interim 2011 Sub National Household Projections (2013) » Moderate falling household size » Project forward impact of market slow-down » Increased numbers of multi-adult households, lower rate of single person / couple households

2008 Headship Rate derived Household / Dwelling Projections

Conversion to dwellings assumes a 2.5% empty property assumption (turnover)

Households Scenario (2008 rescaled headship rates) SNPP-2010 Migration-led Natural Change Employment-led (Experian) Employment-led Balanced Commuting 2011 57,356 57,837 57,837 57,837 57,837 2031 70,026 62,708 65,472 69,655 69,484 Total Change 2011 - 2031 Per Annum average household growth Per Annum Dwelling Requirement (2.5% vacancy) 12,669 4,871 7,635 11,818 633 244 382 591 649 250 391 606 11,647 582 597

2011 Headship Rate derived Household / Dwelling Projections

Variant headship rates projected forward over 20 years reduce resultant household growth

Households Scenario (2011 SNHP Trend based headship rates) SNPP-2010 Migration-led Natural Change Employment-led (Experian) Employment-led Balanced Commuting 2011 57,254 57,832 57,832 57,832 57,832 2031 68,369 61,383 64,368 67,880 67,720 Total Change 2011 - 2031 Per Annum average household growth Per Annum Dwelling Requirement (2.5% vacancy) 11,114 3,551 556 178 570 182 6,536 10,048 327 502 335 515 9,888 494 507

Understanding the Labour-force Implications

All the projections include a breakdown by the age and sex of the population – enables size of labour-force to be assessed

Labourforce Scenario SNPP-2010 Migration-led Natural Change Employment-led (Experian) 2011 69,577 68,268 68,268 68,268 2031 74,704 63,202 64,707 72,831 Total Change 2011 - 2031 Per Annum average 5,127 -5,066 256 -253 -3,561 4,563 -178 228 Employment-led Balanced Commuting 68,268 72,589 4,321 216

Evaluating the Scenarios

Important to assess the merits of the scenarios in wider policy terms and also with regards their alignment with the NPPF

• Sustainable balance between economic ambitions and housing provision represents an important consideration: – Two of the demographic scenarios (migration-led and natural change) would result in a reduced labour-force – In-migration of new working age households and the retention of those currently moving out of the area required to ensure balance achieved • ‘Boosting the supply’: – All scenarios represent uplift based on last five years completions – Migration-led scenario would not represent an uplift against 10 year average – Considering impact on addressing affordable housing need

Considering the need for affordable housing

Housing need survey – Headline Findings

DCLG Needs Assessment identified a net annual need for affordable housing of 551 dwellings per annum (2011)

• This represented an increase in affordable need from 417 as calculated through the 2008 assessment • Calculation includes the addressing of a large backlog of current need over five years – Backlog of 2,127 or 425 per year • Newly arising annual need was 556 households a year – 47% of new households identified as unable to afford market housing – Current annual supply of 430 lettings per year doesn’t meet this newly arising need adding annually to the backlog » 126 households per year estimated as in need and not met through the annual supply

Affordability Ratios

Ratios remain relatively comparable, albeit slightly lower, between 2010 and 2012 Evidence that affordability remains an issue in Lancaster Ratio of Lower Quartile Earnings to Lower Quartile House Prices

8,00 7,00 6,00 5,00 4,00 3,00 2,00 1,00 0,00 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011R 2012P Lancaster Lancashire England

Changing levels of household formation

Demographic modelling includes estimates of gross household formation levels

• Natural Change scenario used – Does not take account of migration trends – Locally derived need • Constrained to younger household groupings • Suggests gross household formation rate of approximately 1,500 per annum (2011 SNHP rates) • Would result in a higher level of overall need for affordable housing • Check against provision of affordable stock – lettings • Private rented sector role in addressing need

Emerging Conclusions

Summary of findings to date

Post recession slow down in the local economy / housing market Forecasts / projections show importance of aligning economy and housing to change trends going forward

• Authority of Lancaster represents a relatively self-contained (albeit locally varied) housing market • Historically migration trends have shown inflow of students but out-flow of graduates / younger households • Impact on ageing population profile if trends sustained • Recent completion levels notably below planning targets / demand • Stock profile reflects national changes to private rented sector / growth in flats • Transactions data shows stagnation of price and significant reduction in level of activity

Summary of findings to date

Post recession slow down in the local economy / housing market Forecasts / projections show importance of aligning economy and housing to change trends going forward

• Availability of employment opportunities important driver. Latest forecasts paint an increasingly positive picture • Wider economic ambitions if realised would generate a further step change with impacts on infrastructure investment (including housing) • Projections show objectively assessed need of between 510 – 610 to match baseline economic forecast • Evidence highlights sustained need for affordable housing – Low market activity / completions potentially compounding issue

Workshop Discussion

Discussion Prompts

Presentation has highlighted a number of points for debate / discussion

• How does the modelling of objectively assessed needs align with other examples?

• What factors will influence population change and in particular future migration levels?

– Market position?

– Economic investment?

– Supply driven?

• Who are we planning to accommodate?

– Incoming households – Local need – retention of graduates • What are the factors influencing the rate of household formation and how might these change?

Next Steps

Concluding the Research

Number of steps required to finalise research

• Reflection on feedback from today • Refinement of modelling outputs • Report drafting and client group review • Publication of the final report

“ Corroboration, consistency and integration will ensure a joined up strategy and be more likely to deliver a good and sound plan. For example consideration of the long term demographic and economic led projections may reveal that they are producing a similar level of housing requirement. If this will ensure you meet your objective of achieving x jobs over the plan period as well as addressing the high level of affordable need that exists, then there is a consistent set of evidence which integrates your strategy together and can be justified” (LGA / PAS, July 2013)