East Cambridgeshire Local Plan Examination: Inspector’s Matters, Issues, and Questions for Discussion at the Examination Hearings

Representations: Lichfields on behalf of Gladman Developments Limited Date: 22 May 2018 Our ref: 16168/MS/BHa

Subject Matter 3: Objectively Assessed Needs for Housing and Employment Land

Issue 1: Whether the Council’s approach to calculating its full, objectively assessed needs is justified, based on up-to-date and reliable evidence, effective, positively prepared, and consistent with national policy?

1.0 Objectively Assessed Need

20. What is the implication of there being a different time period for housing need and employment growth? What is the justification?

1.1 The Council uses different time periods for housing need (2016 to 2036) and employment growth (2014 to 2036). It is clear that this inconsistency in base date has arisen because ‘late in the day’ the Council has chosen to use the proposed draft ‘standard method’ as an assessment of housing need, which has a base date of 2016, rather than its OAN from PE6 which has a base date of 2014. The Council appears to have offered no justification for the application of different time dates. The Vision for the plan is forward looking and appears to overlook the inconsistency in the base date of the delivery of housing and jobs in the District stating that: “In 2036, we will have built a better East Cambridgeshire, accommodating the development of 10,835 new homes and 6,000 jobs”. 1.2 The delivery of housing and jobs are inherently linked in any given location and para 158 of the NPPF requires strategies for them to be integrated. The outcome of not providing sufficient housing to accommodate job growth is unsuitable commuting patterns as people are not able to live close to these new jobs. East Cambridgeshire is, effectively, not planning to meet the needs of housing over the period 2014-2016 but to deliver jobs; it cannot demonstrate that in doing so it will have properly integrated its approach or show that it will not lead to unsustainable patterns of commuting contrary to the NPPF’s golden thread for sustainable development.

1.3 Further, there are additional significant problems with the Council seeking to re-base its plan to 2016, relating to the impact on the HMA as a whole. These reasons are set out in more detail in Section 4.0 of the Technical Annex at Appendix 2 attached to this Matters Statement. In summary, the most recent HMA-wide assessment of housing needs (including drawing on employment growth estimates) is that set out in the Cambridgeshire SHMA. Because East Cambridgeshire has significantly under-delivered against its housing requirement in the 2011-16 period, but has seen quite high job growth, it is inevitable that there has been a significant change in commuting patterns which will have had knock-on impacts in the rest of the HMA

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(i.e. areas are now needing to provide housing for workers commuting into East Cambridgeshire, or are not receiving in-commuters on the same basis as in 2011). An attempt by East Cambridgeshire to ‘bake-in’ these new commuting assumptions will impact on the rest of the HMA, but in a way that the Council cannot demonstrate. On this basis, a consistent updated employment-led scenario can only be re-based if it is done so for the entire HMA. This has not been the case, and the Council’s position on employment and housing cannot be demonstrated to be integrated as required by para 158. Nor can it be shown that there is a clear understanding of housing needs across the HMA, as required by para 159. This is a very significant failing.

2.0 Employment

21. Is the objectively assessed need for economic development based on an appropriately defined functional economic market area?

2.1 N/A

22. Is the need for 6,000 jobs consistent with the evidence? In particular, why is there such a difference between the East of England Forecast Model (EEFM) of 2014 and 2016 (7,100 jobs and 4,820 jobs respectively)? How do past trends inform the figure of 6,000 new jobs within the submitted Local Plan? How has the potential to reduce the level of out commuting been taken into account in calculating the 44.4 ha ‘need’ for employment land within the district?

2.2 The Council’s evidence (PE06) shows that over the 2014-36 period its concluded OAN would support the level of job growth set out the EEFM 2016 of 4,820. However: 1 The Council has not demonstrated that its chosen figure of 6,000 can be supported by the concluded OAN in PE06, and thus the 6,000 job figure is not consistent with the evidence; 2 In any case, the proposed housing need figure in the plan is not based on this time period because of a late-in-the-day, somewhat curious, and utterly mistaken change to apply the ‘standard methodology’ with a 2016 based date. This means any under-delivery of housing need associated with employment growth between 2014 and 2016 is effectively ‘wiped clean’; 3 For the reasons set out in Section 4.0 of the Technical Annex, the Council’s evidence base is infected with the more fundamental flaw that (due to significant housing under-delivery since 2011) it is inconsistent with the most recent HMA-wide evidence. The under-delivery of housing combined with job growth in the District means that there has been a significant change in commuting patterns since 2011. If East Cambridgeshire effectively ‘wipes the slate clean’ and plans based on commuting in 2014 or 2016, it is planning for housing based on commuting at those times, not in 2011 (which is the assumption adopted in the Cambridgeshire SHMA). Without producing a consistent assessment of employment and housing needs from an agreed based date with the rest of the HMA, East Cambridgeshire cannot demonstrate that its housing figure will not have a knock-on effect in the rest of HMA, and thus the Council does not have a “clear understanding” of needs within the HMA as required by the NPPF para 159 and is not able to show that its strategies are integrated (NPPF para 158).

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23. Is the assumption that employment land would be lost to other uses, over the plan period, @0.98 ha per annum justified? Is it correct that the requirement for employment land to cater for both job creation, and the loss of existing employment land to other uses, is for around 66 ha of employment land allocations?

2.3 N/A

3.0 Housing:

24. Is the Council’s use of the standard methodology to determine local housing need, referred to within the consultation draft of the National Planning Policy Framework, justified, positively prepared, effective, consistent with national policy, and an appropriate alternative methodology to that set out within the Planning Practice Guidance?

3.1 No. Gladman considers that the Council’s chosen approach to applying the standard methodology to determine housing need fails all four of the tests of soundness. 3.2 Examination Document PS.EVR2 (Policy LP2) states at para 2.1 that:

“The earlier stages of plan preparation relied on the ‘old’ local method of calculating an ‘objectively assessed need’ (OAN) for housing, rather than the new, national standard ‘Local Housing Need’ (LHN) method.” 3.3 The Council’s statement that OAN is an ‘old’ method no longer to be applied but replaced by the ‘new’ standard method is curious and factually inaccurate. At the time of writing, the draft Framework (which contains reference to the standard methodology) and a draft of the suggested text for the PPG on the standard methodology have both just closed for consultation. Whilst the Government has indicated its intentions to implement the new standard methodology upon adoption of the revised Framework, it remains the fact that at the time of this EIP it will not be adopted national policy. Even if it were the case that the draft NPPF was given weight, para 209 of the draft Framework sets out clear transitional arrangements for the use of the standardised methodology: “The policies in the previous Framework will apply for the purpose of examining plans, where those plans are submitted on or before [ ] [this will be the date which is six months after the date of the final Framework’s publication]. In these cases the examination will take no account of the new Framework.” (emphasis added) 3.4 On the basis of these proposed transitional arrangements and given that this plan is at examination, the draft Framework indicates that it should take no account of the new Framework, including the use of the standard methodology.

3.5 Setting aside the timing of the introduction of the standard methodology, the Housing White Paper first referenced the Government’s intention to introduce a standard methodology with a purpose to address issues with slow plan progress and in areas where objectively assessed needs were not being addressed because authorities were “coming up with their own methodology”. Nowhere in the Housing White Paper or in the draft NPPF does Government suggest that the purposes of implementing such a methodology is to render housing requirements in areas with post-NPPF up-to-date plans (as is the case in East Cambridgeshire) out-of-date as soon as the final revised Framework is published. There is nothing to suggest that Government believes

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current requirements based on OAN are inherently wrong and/or that the approach of the current PPG guidance on OAN – properly implemented - should no longer apply by virtue of the fact that it is looking to adopt a standard methodology. 3.6 Furthermore, the draft Guidance is also clear that the standard methodology figure is not a blanket requirement figure which should be taken as read. It sets out provisions on deviation from the Standard Methodology that will in due course need to be considered when it is applied for planning making, alongside the needs of specific groups, including explicit provisions for considering an increase in the total housing figures where it could help deliver the required number of affordable homes. It is thus clear that the Standard Methodology is not envisaged by the Government to be anything other than the ‘minimum starting point’ and the Council has provided no evidence to suggest that deviation from the Standard Methodology is not necessary or that it has tested alternatives in the context of the revised NPPF. It cannot ‘cherry pick’ the bits of the new draft policy it likes the look of whilst ignoring the bits it thinks unhelpful or has not read.

25. How does this methodology compare in absolute numerical terms to the more traditional approach set out within the Planning Practice Guidance and which has been followed within the October 2016 Objectively Assessed Housing Need paper (PE6)? What is the Council’s reason to alter its approach to the calculation of its objectively assessed need between the publication of the Further Draft Local Plan in February 2017 and the Proposed Submission version of November 2017?

3.7 In absolute terms, the ‘standard methodology’ as published by MHCLG in September 2017 advances a housing need for East Cambridgeshire of 598 dpa 2016 to 2026. However, it should be noted that the standard calculation outputs are not static and will be updated to take account of both new household projections and affordability data. New affordability data was published in April 2018 and the median workplace-based affordability ratio increased from 9.5 in 2016 to 9.86 in 2017. This worsening affordability has the impact of increasing the housing need for East Cambridgeshire, based on the standard methodology calculation to 609 dpa. Even on its own terms, therefore, the Council’s figure is wrong.

3.8 The Council’s evidence-based report PE6 purports that OAN for East Cambridgeshire amounts to 586 dpa over the period 2014 to 2036. However, as set out in our response to Q.27 and the appended Technical Annex, PE6 does not contain a PPG compliant assessment of OAN in East Cambridgeshire1. Therefore, the OAN in PE6 cannot be used as an alternative to the standard methodology figure for the East Cambridgeshire Local Plan.

3.9 The reason why it chose to alter the approach from the calculation of OAN to the standard method can only be answered by the Council. It is curious that Peterborough City Council has also elected to make the same mistake with its own Local Plan as submitted to the SoS in March 2018. A possible motivation (which if true would do no credit to the Council) is that the movement of the base date from 2014 for the OAN calculation to 2016 for the standard method wipes an additional two years of substantial backlog from unmet housing need in East Cambridgeshire from the Proposed Submission Local Plan2.

1 In this important respect, therefore, Gladman cannot subscribe to any intimation – based on the wording of question 25 – that the 2016 OAN report (PE6) does follow the PPG correctly. There are, in fact, key flaws in approach. 2 Completions in 2014/15 amount to just 163 dwellings and in 2015/16 only 181 dpa

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26. Is it appropriate that PE 6, which forms part of the Council’s evidence base, relies on a district wide update of the relevant element of the 2013 SHMA, which covers the whole of the Cambridge Housing Market Area? Does the geographical extent of the HMA still remain appropriate and justified? Does the continued reliance on the wider 2013 SHMA remain consistent with the advice within the PPG, ‘that local authorities should co- ordinate future housing reviews so they take place at the same time’, given that it informed the adopted Local Plan, which the submitted plan seeks to replace? 3.10 The NPPF paras 47 and 159 clearly establish the HMA as the geographical unit for securing a “clear understanding of” and then “meeting” housing needs. Paras 178 – 181 of the NPPF deal with planning strategically across local authority boundaries. In the context of a Plan that – like the adopted Plan - seeks to distribute a portion of its need to elsewhere in the HMA, it is clearly important for its strategy to be based - like the adopted Plan was - on an up-to-date and agreed picture on OAN across the wider area. Without this, it is not possible to know that the various proper questions over meeting economic and housing needs, and distribution across a wider area, have been properly answered. With an OAN update only for East Cambridgeshire, the Council cannot answer these wider questions. Its approach cannot satisfy the tests of the Framework. 3.11 More specifically, for the reasons set out in Section 4.0 of the Technical Annex, the Council cannot seek to update its employment forecasts (and therefore employment-led housing needs) without regard to the rest of the HMA. Under-delivery since 2011 has led to a change in commuting patterns (by virtue of the area achieving its job growth but under-shooting on housing delivery), and the Council is now seeking to re-base its housing need based on more recent commuting patterns which are not taken into account elsewhere in an assessment of need or plans for the rest of the HMA. For East Cambridgeshire to undertake this exercise alone without regard to the rest of the HMA means it cannot have a “clear understanding” of needs across the HMA as required by the NPPF. It will also have knock-on implications for the rest of the HMA, which will not be planning on the basis of consistent commuting assumptions.

3.12 Based on the Council’s work, it believes the geographical extent of the HMA remains justified – the Council’s own evidence (PE06 para 37) concludes:

“the latest migration and commuting data provides up-to-date supporting evidence for the established definition of the Cambridge housing market area.”

3.13 The only way in which the Council can be confident that its new housing strategy will ensure that housing needs are met across the HMA, based on a clear understanding of those needs, is to either: 1 Undertake a wholescale SHMA update which updates the employment forecasts and the base date for all of the HMA authorities, effectively starting again based on the current commuting patterns (which have changed since 2011) with the agreement of all the other HMA authorities; or 2 For East Cambridgeshire to maintain the 2011 base-date and plan to make-up the shortfall in delivery since 2011 (amounting to a residual requirement of 720 dpa from 2018 onwards), such that between 2011 and 2031 it meets the housing (and employment) figures it agreed with the HMA.

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27. Are the housing figures and assumptions contained within PE6, robust and justified? Do they take into account recent DCLG household projections, appropriate market signals, forecast jobs growth and the need for adequate levels of affordable housing to be provided? Has an allowance been made for vacancy rates and second homes with reference to existing and future housing stock? 3.14 A detailed review of PE6 is contained within the Technical Annex appended to this Statement. For the reasons set, out the figures and assumptions are not justified. 3.15 PE6 takes into account the latest official projections, but disregards them due to the effect of recent under-delivery in East Cambridgeshire – the principle of doing this is agreed. The disagreement with Gladman is that PE6 reverts to the 2012-based projections, but fails to fully consider whether these have also been affected by under-delivery, given the consistent and significant under-delivery which has been occurring in East Cambridgeshire since the onset of the recession. In the Council’s view (if it was based on PE6), an upward adjustment to the most recent (2014-based projections) to the 2012-based projections also fulfils the requirement for an uplift for market signals and employment; a position that is logically fallacious. 3.16 For the reasons set out in the Technical Annex (Section 2.0) a more appropriate assessment of future population change in the context of East Cambridgeshire is one which draws upon a long base period (e.g. 10 years) and where this base period takes into account periods of high and low housing delivery. On this basis, the demographic component of housing need in East Cambridgeshire would be 607 dwellings per annum 2014-36. 3.17 PE06 conflates its market signals adjustment with its demographic adjustments; but this is to make a logical error because the purpose of the two factors are distinct. Demographic adjustments are to correct for factors which may have unduly influenced past demographic trends in order to arrive at a more accurate estimate of future demographic need. Market signals uplifts are to provide more housing above that estimate of future demographic need in order to improve affordability and, as a result, induce extra household formation. The SHMA’s (PE06) uplift amounts to just 3.6% above future its estimate of demographic-based growth, and there is no evidence whatsoever that this could reasonably improve affordability (which in East Cambridgeshire is currently at an all-time high). Indeed, the PE06 has not even sought to engage with the question – thereby failing to address PPG ID2a-020. 3.18 Analysis by Lichfields shows that a c.10% uplift is needed as a minimum to reasonably expect an improvement in affordability, and that this level of growth – c.665 dpa when applied to the demographic figure of 607 – is a level of growth that could reasonably be expected to occur, given plan outcomes elsewhere. The evidence on market signals actually supports much higher levels of uplift, to the point that if it were concluded that the OAN Report’s preferred demographic-based figure (using the 2012-based projections) was the most appropriate, this would not mean an OAN lower than 665dpa, because in these circumstances the correct response based on the PPG is for a higher uplift to be applied to better improve affordability whilst being a reasonable figure. 3.19 The flaws within the Council’s assessment also undermine the reliability of its affordable housing needs assessment because by adopting a lower demographic projection it will reduce the scale of affordable need within new household formation. Further, the low levels of housing delivery in recent years mean the backlog of affordable housing is likely to be greater now than

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when the SHMA was produced, and the worsening affordability also means future need could be higher. 3.20 Due to data availability limitations in PE6 (it is not clear what assumptions it has applied on, for example, income thresholds), Lichfields has not been able to replicate the affordable housing needs assessment. 3.21 However, the OAN Report makes the assumption (paras 141 – 143) that the affordable housing need – at 22% of its concluded OAN – “aligns reasonably well” with past rates of delivery as a justification for not making an uplift to address affordable housing need. In reality, since 2011, the rate of affordable housing delivery has been just 13.3% and last year was 4.5%. If the affordable housing need itself is greater, and a bigger uplift is necessary to reflect the realistic likely percentage, this will reinforce the need the 665 dpa figure above to be treated a bare minimum. The OAN Report also implies (para 143) that an uplift is a policy-on matter for the Council which sits at odds with the Judgment of Dove J in Kings Lynn3. In any event, the Council’s OAN cannot on any sensible basis be concluded to be below c.665 dpa.

3.22 An allowance is made for vacant and second homes in the Council’s evidence, and for the purposes of its assessment Lichfields has adopted the same assumption.

28. What assessment has taken place of the needs of particular groups, by household size, type and tenure, including self-build and custom housebuilding? What assumptions have been made to calculate the need for specialist housing types, for example, housing for older people and students, and for households with specific needs, to ensure that the appropriate level of need is made explicit within the plan to enable provision and delivery of the required levels and type of housing? Does the housing figure require any amendment to cater for these needs?

3.23 The Council is failing to address the needs for all types of households, particularly older households. In PS.EVR6 the Council acknowledges the need for adaptable and accessible housing in order to help older people remain in their homes, and the overall growth in older households in East Cambridgeshire (paras 2.13-2.23). However, the Council then appears to attempt to justify its absence of any policy related to this because:

“it is clear that Government intends to ‘do something’ about homes for the elderly, but at this stage it is not clear exactly what. This will only become clear once new national policy on this matter is published, and we are unlikely to know what this is until the NPPF is published later this year.” (PS.EVR6 para 4.16). 3.24 This position is rather confusing. Current policy (dating from 2012) and guidance (dating from 2014), as quoted by the Council itself extensively at paras 4.11 to 4.15 of PS.EVR6, is very clear that Councils should address the need for all types of housing, and sets out how such need assessments should be undertaken. It is wholly unclear why the Council is unsure about how to address the needs for different types of housing now, and is seeking to defer this until later. 3.25 In any case, the Council does not have a clear understanding of the needs of specialist housing associated with older people (e.g. sheltered or extra care housing). Given these will form an increasingly important element of meeting future needs (as well as having the ability to free-up existing housing) the omission of such a strategy from the plan is a significant failing. The

3 Borough of Kings Lynn & West Norfolk v SSCLG [2015] EWHC 2464 (Admin)

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Council clearly does not have a “clear understanding” of its needs, as required by the current NPPF.

29. Is the plan clear as to the identified need for additional pitches for gypsies and travellers and travelling show people and is the identified need soundly based and supported by robust and credible evidence base consistent with the ‘Draft Guidance to local housing authorities on the periodical review of housing needs- Caravans and Houseboats DCLG 11 March 2016’?

3.26 N/A

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Appendix 1 Housing Need as agreed in the Cambridgeshire and Peterborough Memorandum of Co-operation vs Housing Completions 2011-2031

Table 1 Housing needs for HMA based on 2013 Memorandum of Understanding

-

31

-

Total

2016)

(2011

2011

2012/13 2013/14 2014/15 2015/16 Needs 2013 MOU 2011/12 Cambridge 14,000 700 700 700 700 700 3,500 East Cambridgeshire 11,500 575 575 575 575 575 2,875 Fenland 11,000 550 550 550 550 550 2,750 Huntingdonshire 17,000 850 850 850 850 850 4,250 South Cambridgeshire 19,000 950 950 950 950 950 4,750 Cambridgeshire 72,500 3,625 3,625 3,625 3,625 3,625 18,125 Forest Heath 7,000 350 350 350 350 350 1,750 St Edmundsbury 11,000 550 550 550 550 550 2,750

Source: MoU

Table 2 Peterborough Need with/without unmet need

-

-

2026 Total

Peterborough Housing 2016)

2009 2009

(2011

2012/13 2013/14 2014/15 2015/16 Needs (Core Strategy) 2011/12 Core Strategy Total Need 25,450 1,497 1,497 1,497 1,497 1,497 7,485 Excluding 2,500 Unmet Need 22,950 1,350 1,350 1,350 1,350 1,350 6,750

Source: Based on MoU

Table 3 Completions in HMA

-

Total

2016)

(2011

2012/13 2013/14 2014/15 2015/16 Net Housing Completions 2011/12 Peterborough 740 772 863 1,342 920 4,637 Cambridge 352 472 1,325 713 892 3,754 East Cambridgeshire 369 287 191 162 181 1,190 Fenland 210 320 331 555 290 1,706 Huntingdonshire 847 412 686 514 534 2,993 South Cambridgeshire 694 556 631 867 679 3,427 Cambridgeshire 2,472 2,047 3,164 2,811 2,576 13,070 Forest Heath 332 363 246 182 188 1,311 St Edmundsbury 134 133 238 414 ? 919

Source: Various AMRs

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Appendix 2: Technical Annex

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East Cambridgeshire Local Plan Examination: Technical Annex – Housing Need

Date: 22 May 2018 Our ref: 16168/MS/BHa

1.0 Introduction and Scope 1.1 This Technical Annex has been prepared by Lichfields on behalf of behalf of Gladman Developments Limited (“Gladman”) to support Gladman’s Matters Statement on Matter 3: Objectively Assessed Needs for Housing and Employment Land. It deals with the technical issues associated with the various stages of assessing OAN in the PPG, namely:

 Demographic-led needs

 Market Signals

 Employment-led needs

 Affordable housing needs 1.2 The focus in this report is on the assessment made of OAN in the Council’s 2016 OAN Report (PE06) in the context, however, that the Council’s Local Plan Review is based on the mistaken application of the ‘Standard Methodology’ identified in the draft revised NPPF and PPG. However, in the event it was considered by the Inspector that the Council’s 2016 report might be a potential alternative evidence-base estimate of OAN, this Technical Annex considers whether or not it is robust and satisfies the requirements of the Planning Practice Guidance (“PPG”).

1.3 The context for consideration of the housing need for East Cambridgeshire is:

 The 2015 adopted Local Plan was based on an assessment of OAN and tested against the NPPF and the PPG and found sound;

 There has been an under-delivery in East Cambridgeshire against this OAN of 2,026 dwellings to date;

 The Council is using the Local Plan Review to ‘wipe the slate clean’ of this backlog by re- basing the Plan and its assessment (to 2016).

 Whilst one should not simply add ‘backlog’ to a future assessment of need1, it is nevertheless, crucially important that the effects on the housing situation of this chronic level of under-delivery are properly reflected in the new estimate of OAN.

2.0 Demographic-led needs 2.1 The current PPG is clear that “Household projections published by the Department for Communities and Local Government should provide the starting point estimate of overall housing need” (ID 2a-015). However, it also notes that:

1 In line with the case of Zurich Assurance Ltd vs Winchester [2014] EWHC 758 (Admin)

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“The household projections are trend based, ie they provide the household levels and structures that would result if the assumptions based on previous demographic trends in the population and rates of household formation were to be realised in practice. They do not attempt to predict the impact that future government policies, changing economic circumstances or other factors might have on demographic behaviour. The household projection-based estimate of housing need may require adjustment to reflect factors affecting local demography and household formation rates which are not captured in past trends. For example, formation rates may have been suppressed historically by under- supply and worsening affordability of housing. The assessment will therefore need to reflect the consequences of past under delivery of housing. As household projections do not reflect unmet housing need, local planning authorities should take a view based on available evidence of the extent to which household formation rates are or have been constrained by supply. (ID 2a-015) (emphasis added) 2.2 The Council’s evidence base document which purports to follow the PPG is document PE06 – the “October 2016 East Cambridgeshire Objectively Assessed Housing Need”, hereafter referred to as the “October 2016 OAN Report” or “the OAN Report”. This noted that the most recent projections (the 2014-based projections) suggested lower population and household growth than the previous (2012-based) projections, as shown below in Figure 1 which is taken from the OAN Report. The OAN Report stated that as housing growth had been lower in the 2012 to 2014 period an upward adjustment which equals the 2012-based projections is an appropriate adjustment (PE06 para 48).

Figure 1 Difference between population and household growth between 2012-based projections and 2014-based projections

Source: October 2016 OAN Report, Table 2

2.3 In determining whether any further adjustment is required to the 2012-based projections, the October 2016 OAN Report undertook a series of sensitivity tests using 5-year and 10-year migration assumptions, with and without unattributable population change (UPC)2 (see October 2016 OAN Report Figure 7). However, the OAN Report’s approach to these alternative projections is fundamentally flawed. By its own assertion housebuilding in the 2012-14 period has been unusually low (see OAN Report para 47), and completion figures for 2014-15 show no significant improvement (see Table 1 below).

2.4 The alternative projections in the OAN Report are based on migration trends for the 5 and 10 year periods up to 2015 (at stated in the OAN Report in the bullet points under para 54). As shown in Figure 5 of the OAN Report and in Table 1 below, dwelling completions have been

2 UPC is the element of change occurring between Censuses (e.g. between 2001 and 2011) which cannot be attributed to births, deaths or migration. It can be a result of mis-recording of one or both Censuses, mis-recording of migration or a combination of all three. ONS do not include UPC in its projections because it cannot be sure of the source and UPC is expected to diminish over time with improved accuracy in recording migration estimates. The October 2016 SHMA notes at para 69 that enumeration issues with the 2001 Census mean that UPC should not be included in the projections for East Cambridgeshire. Lichfields does not disagree with the omission of UPC in any projection for East Cambridgeshire for this reason and for the reasons set out by ONS.

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persistently low since 2008/09. Completion rates worsened until 2014/15 when there were just 162 completions, and although have increase marginally since, are still well below the requirement. As shown in Figure 2 net migration to East Cambridgeshire has closely followed completion levels. Because the level of completions correlates with net migration, which in turn correlates with future projections, in East Cambridgeshire completion rates can be a useful indicator of future projections.

Table 1 Housing Completions in East Cambs 2001/02 to 2016/17

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Net Completions 801 591 608 401 796 687 755 467 204 368 369 287 191 162 181 234 Based periods of ONS Projections 2014-based SNPP period 284 2012-based SNPP period 433 Base periods used in October 2016 OAN Report 5 years to 2015 275 10 years to 2015 429 Other base periods 10 years to 2012 525 2016-based SNPP period 238

Source: Based on East Cambs AMRs

Figure 2 Net Completions and Net Migration to East Cambridgeshire 2001/02 to 2016/17

900 1,800

800 1,600

700 1,400

600 1,200

500 1,000

400 800

NetCompletions 300 600 Total Total NetMigratoin 200 400

100 200

0 0

Year ending

Net Completions Total Net Migration

Source: Lichfields based on ONS and East Cambridgeshire AMR

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2.5 In the 5 years feeding into the most recent 2014-based projections (projections which are effectively rejected by the OAN Report), completions in East Cambridgeshire were on average around half the requirement during this time period (575 dpa, as per the current adopted Local Plan). In light of the guidance in ID2a-015, it is therefore reasonable for the OAN Report to disregard these as an appropriate assessment of demographic-led need for East Cambridgeshire. In the years feeding into the 2012-based SNPP, completions were marginally higher but still well below the level of need at this time (as indicated by the local plan requirement which applies from 2011 onwards, and the 2008-based household projections which indicated growth of c.600 households per annum). 2.6 Table 1 shows the average net completions in the 5 and 10 year periods to 2015, i.e. those used in the OAN Report. The OAN Report uses the findings of these scenarios to conclude that the 2012-based projections are an appropriate uplift to make. However, the 5-year migration scenario (which draws upon trends 2010-15) is based on a period where completions were in fact lower than the latest 2014-based SNPP. If the 2014-based projections are unsuitable due to completions in their base period being low (as stated by the OAN Report in para 46) then the 5- year migration scenario which is based on the 2010-15 period must also be ruled out because it is equally based on an period where completions were unduly low. 2.7 Turning to the 10-year trend scenario, in the 10 years 2005-15 average annual net completions were 429 per annum, as shown below. This is almost identical to the number of completions in the 5-year period feeding into the 2012-based SNPP (2008-12) because it includes two years of high completions prior to 2008 (2005/06 and 2006/07) and three years of very low completions post-2012 (2012/13 to 2014/15). This scenario is not really comparable to the 2012- based projections because, rather than being based on a longer period up to 2012, it draws upon some years prior to 2008 and some years post-2012, where it is known that housing completions have been very low.

2.8 A 10-year trend scenario which is comparable to the 2012-based SNPP would be one based on the 10 years up to 2011/12 (i.e. 2002/03 to 2011/12). As shown in Table 1 this would incorporate years where housebuilding was relatively high (e.g. in 2003/04 and 2005/06 to 2007/08) and years in which housebuilding has been relatively low (i.e. since 2009/10). In this 10 year period average annual completions were 525 dwellings per annum; higher than the base period feeding into either the 2012- or 2014-based projections and higher than the periods used in the OAN Report, but still not above the likely level of need (and therefore still potentially a conservative estimate).

An alternative demographic-led projection

2.9 In the 10-year period 2002/03 to 2011/12, the District experienced high and low levels of housing growth and net migration. The use of a longer term trend in East Cambridgeshire is likely to be a better representation of future need, however it should be ensured that such a period incorporates highs and lows in completion/migration trends. As shown above, the OAN Report’s 10-year trend scenario does not to this exercise as it draws on a 10-year period when housebuilding in East Cambridgeshire has been consistently low, i.e. the period 2005-15. 2.10 Using demographic modelling toolkit POPGROUP, Lichfields has assessed long term migration scenarios for East Cambridgeshire using the migration trends observed between 2002/03 and 2011/123. If the levels of migration seen in the 10-year period to 2012 were to continue, over the

3 Migration trends for UK migration only have been adjusted from the SNPP. This is because migration to/from overseas is unlikely to be affected by local housing supply and ONS makes specific assumptions about national levels of international migration.

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period 2014-36 the demographic component of need would be 607 dpa (13,351 total). If the age-specific migration rates in the 10 year period to 2012 were applied, the demographic-led need in East Cambridgeshire would be higher at 713 dpa (15,696 total). On this basis, the level of housing need to meet future household growth in the District, taking into account how past under-delivery has influenced the two most recent sets of official projections, is (as an absolute minimum) 607 dwellings per annum, and in all likelihood – based on more accurate rates-based migration modelling – higher still.

Summary 2.11 The 2014-based projections for East Cambridgeshire do not represent a robust basis for planning for future housing given the level of housebuilding in the District has been persistently and significantly below the level of identified need, leading to unduly low levels of migration to the District (and hence, low projections of future growth). The Council agrees with this conclusion by virtue of the approach in PE06 which adopts the 2012-based projections. 2.12 The 2012-based projections draw upon a period where completions were higher (than the period feeding into the 2014-based projections) but still were significantly below the level of need at the time. The OAN Report’s attempt to justify the 2012-based projections are in fact flawed because the OAN Report draws its migration trends from periods where housing completions were similar to/below the 2012-based SNPP, therefore these are not comparable scenarios. A comparable 10 year scenario to the 2012-based SNPP would be one which draws upon 10 year trends up to 2012; as shown above, this incorporates years in which housing delivery was above and below the level of need (although on average, the level of housing provision was still below the level of need, so this could still be regarded as a conservative estimate). 2.13 On the above basis, it would be reasonable to disregard the latest projections for the purpose of planning for housing in East Cambridgeshire; they are not representative of likely future household growth due to the supressed migration trends which have informed them. The 2012- based projections are similarly based on a period where housebuilding (and net migration) was falling rapidly and well below the level of need. Using a 10-year period up to 2012 which incorporates highs and lows (both in housing completions and migration) is likely to be the most representative of likely future household growth in East Cambridgeshire, and this would suggest a need over the 2014-36 period of at least 607 dwellings per annum.

3.0 Market signals

Approach to market signals - PPG 3.1 The PPG sets out a clear two-stepped process to addressing market signals within the calculation of OAN: 1 Firstly, to determine whether a market signals uplift is necessary. This is set out in PPG ID2a-020 within the first sub-paragraph as follows: “Appropriate comparisons of indicators should be made… A worsening trend in any of these indicators will require upward adjustment to planned housing numbers compared to ones based solely on household projections.” 2 Secondly, when a market signals uplift is required, to identify what scale that should be set at with guidance given that it should be set at a level that could be expected to improve affordability. This is set out in PPG ID2a-020 within the second and third sub-paragraphs as follows:

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“In areas where an upward adjustment is required, plan makers should set this adjustment at a level that is reasonable… they should increase planned supply by an amount that, on reasonable assumptions and consistent with principles of sustainable development, could be expected to improve affordability, and monitor the response of the market over the plan period.”

Council’s approach 3.2 With regard to market signals, at para 104 the OAN Report re-iterates the advice given at PPG ID 2a-020, i.e. that: “A worsening trend in any of these indicators will require upward adjustment to planned housing numbers compared to ones based solely on household projections.”

3.3 The OAN Report goes on to review a number of indicators including house prices, sales volumes, rents, affordability, completions, overcrowding, concealed households and homelessness. 3.4 The OAN Report concludes at para 123 that applying an adjustment which brings the 2014- based projections back up to the total population by 2036 projected in the 2012-based projections (i.e. 111,100) that this “catch-up” uplift reflects market signals (as well as employment trends – this is reviewed in more detail below in Section 4.0). 3.5 However, as the OAN Report has already concluded that the 2014-based projections are not representative of demographic-led needs because they draw upon a period in which housebuilding was particularly low (a point on which Lichfields agrees), then the OAN Report’s demographic-led needs are in effect the 2012-based projections, i.e. this is the likely level of future population and household growth. This means that the OAN Report’s “catch-up” uplift is actually only providing 17 more dwellings per annum over the 2014-36 period, equivalent to 3.6% on top of the expected level of demographic change.

Table 2 SNPP and OAN Report "Catch up" Uplift

Population 2012 Population 2014 Population 2036 Pop’n 2014-36 H’holds 2014-36 Dwellings 2014-36 ONS 2012-based 85,100 87,770 111,100 23,330 12,050 12,440 ONS 2014-based 85,100 86,690 104,590 17,900 9,420 9,730 “Catch-up” 85,100 86,690 111,100 24,410 12,480 12,890

Source: PE06 Table 8

3.6 In East Cambridgeshire, Lichfields disputes two elements of the market signals uplift: 1 The figure to which the market signals uplift should be applied - Lichfields interpretation of the PPG which states “adjustment to planned housing numbers compared to ones based solely on household projections” is that the phrase ‘household projections’ means the likely level of projected household growth. The PPG does not explicitly state that this means the official projections published by DCLG, indeed the PPG is clear that such projections may require adjustment to take account of local factors (in East Cambridgeshire, extremely low levels of housebuilding). Projections which adjust DCLG’s projections still represent the household projections for an area, but with the benefit they take into account local factors. It is to these projections (i.e the likely level of future demographic change) that a market signals uplift should be applied, given that the purpose of a market signals uplift is to provide additional housing over and above demographic-led growth in order to improve affordability. An uplift that simply takes the level of supply to a level comparable to the estimate of demographic growth cannot logically be expected to

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improve affordability. For the reasons set out above, Lichfields consider that the likely level of future household growth is equivalent to 607 dwellings per annum (as a minimum), and it is this figure to which market signals uplift should be applied. In summary, therefore, Lichfields does not agree that the OAN Report’s “catch-up” uplift constitutes a market signals uplift because the uplift from the 2014-based projections to the 2012-based projections is an adjustment to reflect demographic factors, and is not an adjustment for market signals to provide housing over and above future household growth. 2 The scale of the uplift – given the OAN Report appears to accept that future demographic trends are better represented by the 2012-based projections, the OAN Report’s uplift for market signals amounts to only 3.6%. The OAN Report has not demonstrated that a 3.6% uplift on future household growth could reasonably expect an improvement in affordability and for the reasons set out below it is wholly unlikely that this could occur. Indeed, it does not even engage with the question.

Context 3.7 The lower quartile workplace-based affordability ratios for the authorities in the Cambridgeshire HMA and Peterborough are shown in Figure 3. Since 2008 East Cambridgeshire has been the third least affordable district, behind only Cambridge and South Cambridgeshire. As of 2017 affordability in East Cambridgeshire is 10.0 – a record high, exceeding the previous peak of 8.9 seen just before the recession. East Cambridgeshire is less affordable than Huntingdonshire (with an affordability ratio of 9.2), Fenland (7.1, similar to the national average) and Peterborough (7.3). 3.8 Affordability in East Cambridgeshire has worsened since the recession, although this has been more pronounced in recent years. Between 2009 and 2015, affordability worsened from 7.4 to 8.6, but between 2015 and 2017 affordability has worsened from 8.6 to 10.0. The worsening affordability since 2009 and particularly recently is likely to be linked to the very low levels of housebuilding seen in the District.

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Figure 3 Lower Quartile Workplace-based Affordability Ratio - Peterborough and Cambridgeshire HMA

16.0

14.0

12.0

10.0 Peterborough Cambridge 8.0 East Cambridgeshire Fenland 6.0 Huntingdonshire

4.0 South Cambridgeshire

2.0

0.0

1998 1999 2001 2003 2004 2006 2009 2011 2012 2014 2016 2017 2000 2002 2005 2007 2008 2010 2013 2015 1997 Source: ONS

The principle of market signals uplift to improve affordability 3.9 The purpose of a market signals uplift is to ensure the Government’s housing aims (as expressed in the NPPF) are met and to ensure this is reflected in assessments of need by making “upward adjustment to planned housing numbers compared to ones based solely on household projections” (PPG ID2a-020) where market signals indicate such an adjustment is necessary. The principle of providing ‘more’ homes in England has long been established through successive assessments of the country’s problems with lack of housing supply. 3.10 A literature review of these assessments is included at Appendix A. They demonstrate, over a sustained period, a consensus over the need to increase supply above household projections to deliver improvements in housing affordability. This has continued to underpin successive Governments’ approach to assessing housing need, including within the PPG and more recently as recognised within the Housing White Paper. Across these reports, the evidence would suggest that - at the national level - an uplift of between 20.9% and 44.2% above the number of homes implied by household projections alone would be necessary to deliver improvements in affordability. 3.11 Under the current planning system, achieving a national outcome for housing supply is the product of implementing a large number of individual local plans. As such it is fundamentally necessary to link any local strategies to the overarching national principles which are driving Government policy (i.e. the planning version of ‘think global, act local’). Each area will have its role to play in contributing towards the Government’s aims; some more than others, based on their circumstances.

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An evidence-based market signals uplift for East Cambridgeshire 3.12 There are numerous methodological approaches that can be adopted in seeking to quantify an appropriate market signals uplift for East Cambridgeshire based on local evidence of affordability and market signals in the District. The PPG does not set out a single definitive approach. Indeed, it suggests (ID: 2a-020) that the approach is one where – having established that an uplift is required: 1 the adjustment should be one that is reasonable; 2 The scale of adjustment should be related to the relative scale of affordability constraints and other indicators of high demand. The greater the improvement in affordability needed, the larger should be the additional supply response; 3 Plan makers should not attempt to estimate the precise impact of an increase in housing supply; 4 They should increase planned supply by an amount that, on reasonable assumptions and consistent with principles of sustainable development, could be expected to improve affordability; 5 They should then monitor the response of the market over the plan period. 3.13 On the most simple basis, applying the scale of uplifts identified as required to address affordability at the national level of between 20.9% and 44.2% would indicate a housing supply requirement of between 734 and 875 dpa in East Cambridgeshire (based on a minimum demographic-led need of 607 dpa, as per the 10-year trend). Naturally, such an approach assumes other Local Plans would also make appropriate adjustments for their market signals in accordance with Government policy. 3.14 However, it is also clear that we need to look at the circumstances of East Cambridgeshire in identifying an appropriate scale of uplift, given the greater problems of affordability in the district. We have therefore looked at other approaches at the local level, and then draw these together to arrive at a conclusion as to the appropriate uplift.

1. OBR/University of Reading model 3.15 The Office for Budget Responsibility (OBR) produced Working paper No.6 Forecasting house prices in July 20144. The report identifies the following with regards to future average earnings growth and median house price growth (the components of an affordability ratio) in paragraph 3.12: “Using some long-run assumptions for real income growth (2.2 per cent a year, including growth in the number of households of 1 per cent a year) and housing supply (keeping pace with the number of households), and assuming the housing discount rate and wage share variable are stationary, the model predicts around 3.3 per cent real house price growth a year in steady state. In addition, assuming consumer price inflation in line with the Bank of England’s 2 per cent target implies 5.3 per cent a year nominal house price growth in steady state.” 3.16 The University of Reading's affordability model, as set out previously, found a high price elasticity (-2.0) in relation to increases in stock at regional level in England, implying in effect

4 ‘Working paper No.6: Forecasting house prices’ (July 2014) Office for Budgetary Responsibility, Toby Auterson - http://budgetresponsibility.org.uk/docs/dlm_uploads/WP06-final-v2.pdf

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that for every 1% increase in supply, relative prices would be expected to fall by 2%. This broad approach (OBR/UofR) has also recently been used by MHCLG itself in its publication “Analysis of the determinants of house price changes”5 published in April 2018. Whilst referring to house prices at the national level, this lends further support to the adoption of this approach. The implications of the approach is that ceteris paribus - even if housing supply matches household growth, any growth in wages will result in a deterioration in housing affordability. The uplift in supply above projections needs to be sufficient to overcome the house price inflation effects arising from that improvement in incomes, based on the relevant elasticities. 3.17 There has been some degree of economic change since July 2014. OBR’s March 2017 economic outlook would indicate average house price growth of 4.80% per annum and peak average wage growth of 3.7% per annum over the period to 2022 (the horizon of OBR’s economic outlook). Although different in absolute terms to its July 2014 assumptions, the difference between wage and house price growth is the same, i.e. the affordability outcomes under the same assumed rate of housing growth will be the same whether using OBR’s July 2014 or March 2017 assumptions. 3.18 Based on the above reports, with housing supply only based on demographic change (equivalent to 607 dpa) the District would see affordability worsening to around 12.0 by 2036, as shown in Table 3 (full figures are at Appendix B). The District would need to deliver 790 dpa on average over the period 2014-36 (taking into account completions 2014-17) to maintain affordability at its current 2017 level over the plan period. A figure of 790 dpa would represent a 30% uplift on the demographic-led need of 607 dpa. To return affordability to its level in 2014 (which is still above the national average) by the end of the plan period, 920 dpa would be needed between 2014-36.

Table 3 Outcomes of OBR Affordability Modelling

Underlying growth Dwellings 2014-36 Lower Quartile Workplace-based Affordability Ratio Ratio in 2017 Ratio in 2020 Ratio in 2036 607 10.3 12.0 607 dpa (10 year 650 10.2 11.5 10.0 migration trend based) 700 10.1 11.0

790 10.0 10.0 920 9.7 8.6

Source: Lichfields based on UoR/OBR. *Full outputs can be found at Appendix B

3.19 Even then, it should be noted the above modelling assumes a price elasticity of -2.0 which could be seen as cautious. Recent research by Regeneris6 indicates that at a Local Authority level a price elasticity of -1.0 might be more appropriate (1% increase in supply brings about 1% fall in price) and better reflects factors at the local authority level (paras 4.19-4.22). However, this would involve taking a different view to the OBR/NHPAU position.

2. Benchmarking market signals uplifts elsewhere 3.20 Benchmarking East Cambridgeshire against market signal uplifts applied elsewhere in the country is a relevant and helpful indicator of the scale of market signals uplift considered

5 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/699846/OFF_SEN_Ad_Hoc_SF R_House_prices_v_PDF.pdf 6 Why supply matters: the elasticity of house prices at a local level (January 2016) Regeneris Consulting - https://drive.google.com/file/d/0B3JZDh2pal1PaVJncno2dU92Tk0/view

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reasonable against the PPG. At Appendix C we set out a table of where market signal uplifts are being applied either through current SHMAs or in Inspector’s findings on Local Plans. Whilst the position is varied, it does on a general basis confirm two principles: 1 that such percentage rate adjustments are being applied in numerous authorities across the Country reflecting the guidance in the PPG; and 2 that broadly, the more acute the affordability problem (as indicated by the affordability ratio), the greater the adjustment that SHMA consultants, Councils and Inspectors are applying.

3.21 A linear extrapolation of these uplifts suggests that in area with an affordability ratio of around 10 (as in East Cambridgeshire) a 10% uplift would be applicable, albeit areas with affordability pressures similar (or only slightly worse) than that in East Cambridgeshire have seen uplifts of up to 15-20% applied (for example in Braintree and Harlow). In East Cambridgeshire, a 10% uplift on the demographic-led needs of 607 dpa would equate to 668 dpa, a 15% uplift would equate to 698 dpa and a 20% uplift 728 dpa. This would fit appropriately with how uplifts are being applied elsewhere in the country. 3.22 Curiously, the Council states at para 120 of the October 2016 OAN Report that it sets the market signals adjustment “at a level that is reasonable, taking account of the outcomes of other local plan examinations”, however no comparators or examples from elsewhere are given.

Bringing the evidence together 3.23 A summary of the above approaches is set out below in Table 4. The lowest level of uplift would indicate an OAN of 668 dpa for East Cambridgeshire; this approach is based on benchmarking against uplifts elsewhere. The OBR modelling indicates that 790 dpa is needed just to stabilise affordability at its current level in the District, with even more required for there to be any improvement.

Table 4 Summary of market signals analysis

Uplift & East Cambs Figure Approach/Source Uplift to demographic- Implied figure (dpa) led figure 607 dpa (%) National Based Barker Review (lower) 20.9% 734 Redfern Review (upper) 44.2% 875 Local Based OBR-based affordability modelling – maintain at 2016 30% 790 OBR-based affordability modelling – return to 2016 51% 920 Benchmarking market signal uplifts 10-20% 668-728

Benchmarking stock increases 3.24 The PPG highlights the importance of future housing needs assessments being those which can reasonably be expected to occur – in other words, avoiding a situation where housing need is based on implausible scenarios. This is not to say that an assessment of housing need should be moderated by a view on the impact of constraints – the PPG ID2a-004 is clear in this regard . However, it does mean that the uplift should be one that is reasonably plausible.

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3.25 We have reviewed recently (post-NPPF) adopted Local Plans in the South of England and the adopted requirements as a growth rate (Table 5). These levels of growth are likely to be more ambitious than historic targets in those areas due to the NPPF requirement for Local Authorities to deliver a “significant boost” to housing supply, yet have still been judged by Inspectors to be deliverable (i.e. reasonable). 3.26 Cherwell in Oxfordshire has the highest growth rate of 1.82%; a rate which was clearly deemed to be deliverable by the Inspector, and is set to increase further once Cherwell undertakes its Local Plan Review to accommodate a share of Oxford’s unmet need. Several other areas have growth rates of around 1.6-1.7% per annum – higher than rates seen historically but still deemed to be reasonable by those Inspectors.

Table 5 Adopted housing targets as annual growth rates in post-NPPF Plans

Adopted Annual Housing Target Stock 2016 Annual Growth Rate Cherwell* 1,140(+) 62,402 1.82%(+) Swindon 1,625** 94,374 1.72% Mid Sussex 1,026 61,878 1.66% Taunton Deane 850 52,840 1.61% Milton Keynes 1,750 108,981 1.61%

Source: Source: Housing targets - respective Local Plans. Stock - DCLG Council Tax Base data.

*Figure for Cherwell will increase following Local Plan Review to take account of additional need from Oxford.

**Total housing target 2011-2026 22,000 dwellings (1,467 dpa), however Policy SD2 of Local Plan states average annual housing delivery from 2016-2026 will be higher at 1,625 dpa

3.27 Based on a 2017 housing stock of 36,9407, if East Cambridgeshire were to grow at a similar rate to Cherwell (based on Cherwell’s current rate), this would equate to c.665 dwellings per annum. Cherwell is similar to East Cambridgeshire, both being largely rural Districts containing 1-2 major settlements and both being part of wider housing market areas of major cities (in Cherwell’s case Oxford, in East Cambridgeshire’s case, Cambridge). A level of 665 dpa (i.e. growth of 1.8% per annum) would be in line with East Cambridgeshire providing a 10% uplift on its demographic-led needs (of 607 dpa). There is nothing to suggest areas cannot exceed a 1.82% rate – indeed, Cherwell will too once it takes Oxford’s unmet need. 3.28 On the basis that this uplift would likely achieve some improvement in affordability compared to what might occur without it, and could reasonably be expected to occur, a market signals uplift to 665 dpa 2014-36 is deemed the lowest conceivable response in East Cambridgeshire. The Council’s own proposed housing trajectory on page 74 of the submission draft Local Plan shows a level of delivery at or over 1,000 dpa within the next five years (delivery then tails off markedly in subsequent years due to the choking off of land supply) suggesting the Council agrees such a rate of delivery is more than achievable.

4.0 Employment-led needs

PPG Guidance 4.1 The PPG contains a section providing guidance on housing and economic development needs assessments. The PPG identifies that an OAN should take account of employment trends (ID: 2a-018) with the delivery of housing and jobs being intrinsically linked. In East Cambridgeshire,

7 Source: CLG Live Tables on Dwelling Stock

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where the current strategy draws from a HMA-wide evidence base (i.e. the CCC Population Housing and Employment Forecasts Technical Report and Cambridgeshire SHMA) failure to meet either of these targets means needs go unmet across the HMA as a whole. This is particularly important with regards to patterns of commuting. The PPG clearly states the below with regards to the need to support sustainable patterns of commuting. “Where the supply of working age population that is economically active (labour force supply) is less than the projected job growth, this could result in unsustainable commuting patterns (depending on public transport accessibility or other sustainable options such as walking or cycling) and could reduce the resilience of local businesses. In such circumstances, plan makers will need to consider how the location of new housing or infrastructure development could help address these problems.” (ID: 2a-018-20140306)

Council’s Approach

4.2 The Council is attempting to re-base its housing requirement to 2016. This means that any unsustainable changes in commuting patterns since 2011 are seeking to be, in effect, ‘baked in’ as the Council is not seeking to address unmet requirements back to 2011 (which accords with the base date of the most recent HMA-wide evidence). This re-basing is of particular concern in East Cambridgeshire given since 2011 the Council has failed to meet its housing needs by a staggering margin, with under delivery of 59% in just six years. In the same period the Council has met its job growth figures and therefore a significant misalignment is emerging between jobs and housing.

Context 4.3 In 2011 there were 44,228 economically active residents in East Cambridgeshire, of which 2,002 (4.5%) were unemployed. This means there were 42,446 residents who were economically active and employed. In 2011, there were just over 29,0008 jobs in East Cambridgeshire, and therefore the labour force ratio (the ratio of employment residents to jobs in the District) was 1.44, as shown in Figure 4. 4.4 Since 2011, the number of employed residents (as measured by the economically active population less those unemployed9) has risen by 4,158 to 48,386 as of 2016, whilst the number of jobs has increased at a much faster rate, increasing by 9,267 to 38,665 in 2016. As of the 2016, this means that the labour force is now 1.21, as shown below.

8 Source: Cambridge Econometrics 9 The economically active population has been derived based on the Census economic activity rates by age and sex, projected forward using the Office for Budget Responsibility Labour Force Projections (January 2017) and applied to the mid-year estiamtes. Annual Population Survey (APS) estimates of the economically active population in East Cambridgeshire fluctuated significantly by quarter and were subject to high margins of error. Unemployment rates are taken from the APS model-based estimates of unemployment.

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Figure 4 Change in Employed Residents, Jobs and Labour Force Ratio 2011-16

50,000 1.50

45,000 1.45 40,000 1.44 1.43 1.40 35,000 30,000 1.35 25,000 1.30 20,000 1.28 1.25 15,000 1.25 1.24 1.20 Labour Force Ratio

10,000 1.21 Employed Residents/Jobs 5,000 1.15 0 1.10 2011 2012 2013 2014 2015 2016

Employed Residents Jobs Labour Force Ratio

Source: Lichfields based on Census, OBR, Cambridge Econometrics

4.5 This significant increase in jobs has mean that the Council has achieved (indeed exceeded) its job target, within the first five years of its plan period, but has fundamentally failed to provide the housing to sit alongside this. The significant decrease in the labour force ratio means the District has seen either: 1 A significant increase in the number of its residents employed in more than one job (this is unlikely to explain the change seen as this accounts for only a small number of people in part-time employment; 2 People who previously out-commuted from East Cambridgeshire to jobs elsewhere (e.g. Cambridge) are now not out-commuting and instead are remaining in East Cambridgeshire for employment; or 3 People who live outside East Cambridgeshire who previously worked elsewhere are now commuting into East Cambridgeshire for work.

4.6 In reality it is most likely a combination of (2) and (3) has contributed to the majority of this change. These changes in commuting patterns are significant because the most recent consistent position on future housing and job growth for the entire HMA is set out in the Cambridgeshire SHMA 2013. It is based on a position across the HMA as at 2011, and is the basis which plans across the HMA have/are being advanced upon. 4.7 The Local Plan is clear (see the Vision on page 9, for example) that it is the aspiration of the Council to reduce out commuting from the District and increase the job density ratio. However, such an inward looking position does not fulfil the requirement of the District to meet OAN across the HMA. Whilst the Council may claim that it has managed to ‘claw back’ some out commuters through this significant increase in jobs, this does not assist those working elsewhere in the HMA who need somewhere to live. If the housing is not delivered alongside

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jobs this can only lead to unsustainable patterns of commuting. It is not realistic to expect that everyone who currently out commutes would change to a new job in East Cambridgeshire. Indeed, based on the significant under delivery of housing across the entire HMA since 2011, there is a very real prospect that new jobs will be filled by people travelling significant distances into the HMA to fill them, contrary to the requirements of the PPG on sustainable patterns of commuting. This is the issue that the PPG ID2a-018 seeks to tackle. 4.8 In line with the Cambridgeshire SHMA’s findings, East Cambridgeshire’s associated housing requirement is 575 dpa over the period 2011-31. This means that since 2011, 575 dpa should have been provided based on commuting patterns which existed in the HMA as of 2011. As noted, the Council has substantially under-delivered against this target, and is now (for the purposes of its Local Plan Review) seeking to ‘wipe the slate clean’ of this under delivery.

4.9 If the Council were to continue to have regard to the requirement as agreed across the HMA over the 2011-31, the Council would need to provide 10,072 dwellings by 2031, or 720 per annum over the period 2018/19 to 2030/31. If, between now and 2031 the Council does not provide this level of housing growth, then it is not adhering to the most recent HMA agreed position, resulting in changes in commuting patterns and potentially creating unmet need in the HMA.

Table 6 Completions since 2011/12 and residual requirement to meet agreed HMA housing figure

Completions (year ending) Residual need 2012 2013 2014 2015 2016 2017 2018-31 Annual 369 287 191 162 181 234 10,076 720

4.10 The high level of residual need associated with the most recent HMA agreed position (i.e. that based on the Cambridgeshire SHMA 2013) provides further justification for East Cambridgeshire Council to significantly boost its housing supply in the short-medium term (i.e to 2031) in order to ensure it continues to meet its agreed housing needs as part of the wider HMA. Again this demonstrates that the Council’s attempts to ‘wipe the slate clean’ are likely to have significant knock-on impacts in the HMA which it has not understood (or even tried to understand). It highlights the complexities which arise when individual authorities within a HMA which are strongly linked to eachother in commuting terms attempt to assess their employment-led needs on an inconsistent basis with one another. Such issues would not arise if a wholescale update of the Cambridgeshire SHMA was undertaken to provide a new assessment on a consistent basis for all the authorities, and that is what is required by para 159 of the Framrwork.

Summary 4.11 By seeking to re-base its housing position to 2016, the Council is effectively ‘banking’ all the job growth it has achieved between 2011-16, without providing the share of housing growth agreed with the HMA (i.e. that set out in the Cambridgeshire SHMA). This is a wholly inconsistent approach and seeks to undermine the strategies of the other authorities in the HMA who either previously relied upon East Cambridgeshire for workers or are now losing workers to East Cambridgeshire. Notwithstanding the likelihood that unsustainable commuting patterns are occurring, other parts of the HMA which are now providing workers to support East Cambridgeshire’s jobs are not aware or planning for housing on this basis. 4.12 Had East Cambridgeshire met both its jobs and housing target during the 2011-16 period, and the patterns of commuting into and out of the District had remained similar to when the

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Cambridgeshire SHMA was undertaken, the Council could re-base its housing needs assessment (based on employment growth) to 2016 in the comfort that this might not have a significant distorting or knock-on effects elsewhere in the HMA. This has not occurred – the Council has significantly under-delivered housing, and now seeks to ‘bake in’ current commuting patterns which it might think are ‘advantageous’ to itself, without regard for the HMA-wide impacts. Should the Council wish to ‘wipe the slate clean’ it can only legitimately do so if it undertakes an updated assessment with the whole of the HMA and which all authorities agree becomes the new position, and this assessment is then subject to appropriate testing.

Affordable Housing Needs 4.13 The headline methodology for the assessment of affordable housing needs in the OAN Report appears reasonable in principle. 4.14 However, there are a number of concerns: 1 If the demographic baseline upon which the calculation is based is flawed then the concluded affordable housing need figures cannot be relied upon10. 2 The underlying assumptions for example on wages and proportion of income are also not clearly set out. For example, if the OAN Report has over-estimated the amount of income households might spend on housing or not under-estimated the assumed cost of housing for households of different sizes, the analysis will under-estimate the number in affordable need. 3 Furthermore, affordability in East Cambridgeshire has continued to worsen with house prices outstripping wages at an ever-increasing rate, and with an incredibly low level of affordable housing delivery (just 11 were provided last year). Therefore it is quite likely that the need for affordable housing is now greater than when assessed in the OAN Report.

4.15 Overall, it is likely that the affordable housing needs figure for the District is higher than that in the OAN Report, providing further justification for a higher uplift on the demographic-led needs. At the very least, the current estimate is not justified. 4.16 There is then the further task of estimating the scale of uplift required based on the likely proportion of affordable homes delivered as a percentage of market housing. In East Cambridgeshire, delivery of affordable homes has been woeful in both absolute and percentage terms. The average is just 13.3% (see Figure 5, extracted from the Council’s AMR).

Figure 5 Affordable Housing Delivery in East Cambridgeshire

Source: Annual Monitoring Report December 2017

10 This is because the proportion of newly forming households considered to be unable to access market housing should be applied to a higher demographic projection than that assumed in the SHMA.

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4.17 The OAN Report states (paras 141 to 143) states:

“141. The percentage of affordable dwelling completions ranges from 31% of all completions in 2010/11, to 5% in 2012/13, and averages at 18% over the period 2002 to 2016

142. The overall housing figure that has been identified is 12,890. The total need for affordable housing that has been calculated is 2,854. The required number of affordable homes is therefore 22% of the overall housing figure, or 25% if 1,500 of the overall housing figure continues to be redistributed elsewhere (see paragraph 10(b) of this report). 143. This proportion aligns reasonably well with the average percentage of affordable dwelling completions over the period of available data. If it could help deliver the required number of affordable homes, ECDC should consider an increase in the total housing figures included in the local plan, which is a matter for ECDC to determine.” 4.18 Paragraph 143 draws an erroneous conclusion by making a simplistic comparison of 22% with the 18% derived from a longer-period back to 2002, given the average percentage in the AMR is just 13.3%. The higher percentages seen in the period prior to 2011 are not typical of current circumstances, and thus not “likely” as required by the PPG. From 2011, the National Affordable Housing Programme allocated just £1.13bn per annum, compared to the £2.8bn per annum in the 2008-11 Programme. The latest Government programme allocates an increase, but outside London it is no longer permitted to invest this via s.106 agreements meaning that the expectation is that s.106 agreements will deliver affordable homes at nil grant. 4.19 If the real likely average proportion for delivery – of 13.3% - was applied, a total housing delivery of 21,459 would be needed to meet affordable need, well in excess of the 12,890 figure. There is a need to consider an uplift to ensure the full OAN reflects the NPPF para 159 requirements to address affordable housing need, in line with PPGID2a-029 and the Judgment of Dove J in Kings Lynn11.

5.0 Summary 5.1 The Council’s October 2016 OAN Report cannot be relied upon to represent OAN for East Cambridgeshire for the Local Plan review. It fails in almost every element of the OAN calculation as per the current PPG methodology, for the following reasons; 1 It recognises that the most recent projections are not suitable (a point which is common ground), however fails to recognise that the previous (2012-based) projections and its alternative 5 and 10 year migration trend projections are also not suitable because they draw on periods where housing delivery was also well below what was needed. Our analysis shows that a longer term trend which incorporates highs and lows in housing delivery would yield a need for 607 dpa 2014-36; 2 The OAN Report then conflates its adjustments for demographic trends with its market signals uplift, stating that its demographic adjustments (which amount to a 4% uplift on the 2012-based projections) reflect market signals. The purpose of a market signals uplift (as made clear in the PPG and by Government) is to provide more housing than that based solely on demographic change. As shown above, future demographic growth in East Cambridgeshire (once recent under-delivery is adjusted for) amounts to 607 dpa; 3 Lichfields analysis shows that at a minimum, around a 10% uplift would be applicable in East Cambridgeshire, giving c. 665 dpa, and this is a level which could reasonably be

11 Borough of Kings Lynn & West Norfolk v SSCLG [2015] EWHC 2464 (Admin)

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expected to occur. In reality, a greater uplift would be necessary to appropriate mitigate worsening affordability given the relevant elasticities; 4 The Council’s approach to employment is flawed and wholly inconstant with the rest of the HMA because it has failed to provide sufficient housing since 2011 and is now seeking to wipe away this backlog and ‘start again’. The scale of under-delivery is such that to continue to meet its requirement by 2031 the District and address unsustainable commuting patterns it would need to deliver 720 dpa between 2018 and 2031. The insufficient delivery of housing in this period will have lead to changes in commuting patterns with the rest of the HMA – there is no evidence that the other authorities have taken into account those changes in their housing needs assessments. Indeed authorities in the HMA (e.g. Cambridge/South Cambridgeshire) continue to plan on the basis of the Cambridgeshire SHMA from 2013. Until an update of the employment-led housing needs assessment is undertaken for the whole HMA, with an updated starting point which reflects changes in commuting patterns since 2011, East Cambridgeshire cannot seek to ‘start again’ and ‘bank’ the job growth it has seen without providing the necessary housing. To do so would be inconsistent with the NPPF requirement for local authorities to have a “clear understanding of needs in their areas”. 5 The OAN Report under-estimates the level of affordable housing need and has similarly under-estimated the likely percentage of delivery of affordable housing as a proportion of market housing. A greater uplift above that concluded upon in the OAN Report is needed to adequately address affordable housing needs.

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Appendix A – Literature Review

Barker Review 1 The Barker Review of Housing Supply12 was a seminal report that continues to influence government policy. Published in 2004 and using a baseline figure of 140,000 private sector dwelling starts in 2002-03, the report concluded that to reduce the long term price trend from 2.7% per annum seen prior to 2004, to the 1.1% per annum seen as an average across the EU, would require an increase of 120,000 additional private homes per annum, totalling 260,000 per annum to 2026, alongside an increased provision of social sector housing. The Barker Review concluded that such a level would be necessary for “improving the housing market” and ensure that “affordability is increasingly improved over time” (paras 1.39 and 1.40). 2 In making such a recommendation, the Review acknowledged that this was in excess of projected rates of household formation (at that point estimated at 179,000 per annum). Even today, with household projections in England at around 210,000 households per annum13 and equating to around 215,000 dwellings per annum (incorporating a notional 2.5% vacancy rate), the 260,000 dwellings per annum concluded within the Barker Review as necessary to increasingly improve affordability would represent a national average uplift of 20.9% above the demographic projection. 3 Flowing from the Barker Review, Government commissioned the development of an Affordability model by Reading University, designed to relate affordability to housing supply in the medium to long term. The key findings from the 2007 version of the model was that the elasticity of house prices with respect to housing stock is found to be relatively high, at -2.0 i.e. a 1% increase in stock at the regional level leads to a 2% fall in house prices, everything else being equal (RD20, page 32). This has informed much subsequent work by Government.

National Housing & Planning Advice Unit (NHPAU) 4 The NHPAU was founded by Government as a direct response to the recommendations of the Barker Review. In October 2007, it published work entitled ‘Developing a target range for the supply of new homes across England’14 flowing from analytical modelling (using the Reading University model) on the impact of the Government’s housing supply target for housing affordability prospects over the medium and long-term. Its conclusion was that a supply range from a minimum of 240,000 dpa (the Government’s annual target at that point) and a high 280,000 dpa should be tested (Table 18), going on to identify (para 4.68): “NHPAU believes that there is a realistic possibility of stabilising the affordability of market housing over the long-term if a supply target for 270,000 net additions to stock, in the right place and of the right type can be adopted through the planning system for delivery before or by 2016.” 5 At 270,000 dwellings per annum, this would represent a national average 25.6% uplift above the bare demographic projection of the 2014-based household projections.

12 ‘Review of Housing Supply, Delivering Stability: Securing our Future Housing Needs’ (March 2004), Kate Barker - http://news.bbc.co.uk/nol/shared/bsp/hi/pdfs/17_03_04_barker_review.pdf 13 CLG 2014-based household projections, which at the national level represent the same level of annual growth projected in the earlier 2012-based household projections. 14 ‘Developing a target range for the supply of new homes across England’ (October 2007), NHPAU - http://webarchive.nationalarchives.gov.uk/20120919132719/http://www.communities.gov.uk/documents/housing/pdf/523984.pdf

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6 Crucially, the NHPAU concluded that if stabilising affordability in each region is the goal, then the most efficient way to achieve that is to proportionately increase supply in the areas where affordability is most severe. Thus it focussed 80% of its uplifts (over the then RSS targets) across the South East, the South West and the East of England.

Bramley & Watkins 7 Academic research by Bramley & Watkins15 has looked at the potential for modelling housing markets at a local level to inform planning decisions. One aspect it considers is affordability impacts of supply changes at the sub-regional level. It includes modelled scenarios that conclude “very high” increases in supply (over other elements within the model) across the South East, defined as 35%, can deliver notable improvements to affordability, including some improvement to affordability in London. This implies that high uplifts just short of 35%, such as around 25% in high value areas surrounding London, would be sufficient to address affordability at a local level (i.e. without spill-over benefits to surrounding areas). 8 Interestingly, this methodological approach is applied by Bramley to a review of the Bristol Area SHMA for Business West16. It concludes that an uplift of 50-60% is appropriate compared to 7.5% suggested by the SHMA.

House of Lords Select Committee on Economic Affairs 9 In July 2016, the House of Lords Select Committee on Economic Affairs published their report ‘Building More Homes’17 which was the output of the House of Lords’ inquiry into the housing market. It reflects on past failure to build sufficient numbers of homes, highlighting how supply has substantially undershot the recommended amounts within the Barker Review. It also draws upon evidence provided to the inquiry by HM Treasury (HMT) which indicated (para 81) that “The modelling suggests that in order to keep the house prices to earnings ratio constant, somewhere between 250,000 and 300,000 homes per year need to be built.” albeit the report goes on to note (footnote 91) that “Due to low interest rates building 250,000–300,000 homes above may now be insufficient to keep the price: earnings ratio constant” 10 Ultimately based on the evidence brought to the inquiry, the select committee concluded that: “To address the housing crisis at least 300,000 new homes are needed annually for the foreseeable future.” 11 At 300,000 dwellings per annum, this represents a 39.5% uplift on the 2014-based household projection equivalent, and although at the upper end of the range identified by HMT, the qualification within the report suggests it would be the figure necessary to keep the affordability ratio constant.

15 'Housebuilding, demographic change and affordability as outcomes of local planning decisions; exploring interactions using a sub- regional model of housing markets in England' (2 October 2014) Bramley & Watkins, Heriott Watt University (Published in Progress in Planning 2015) - https://pureapps2.hw.ac.uk/portal/en/publications/housebuilding-demographic-change-and-affordability-as- outcomes-of-local-planning-decisions(23dfd394-4dc7-406d-ad05-3ee18fdd8497).html 16 Business West: Wider Bristol Housing Market Area Strategic Housing Assessment 2015: Commentary by Bramley http://initiativewest.co.uk/content/uploads/2015/12/Final-Bramley-WoE-SHMA-critique-30Nov2015.pdf 17 ‘Building more homes’ 1st Report of Session 2016–17 (15 July 2016) House of Lords Select Committee on Economic Affairs (HL Paper 20) - http://www.publications.parliament.uk/pa/ld201617/ldselect/ldeconaf/20/20.pdf

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Redfern Review 12 The Redfern Review18 was an independent review of the causes of falling home ownership, and associated housing market challenges. Published in November 2016, it was informed by a housing market model and built by Oxford Economics which looked at the impacts of different supply assumptions on prices and home ownership. The review ultimately concludes (para 33):

“…looking forward, if the number of households in the UK were to grow at around 200,000 per year, new supply of 300,000 dwellings per year over a decade would be expected to cut house price inflation by around 5 percentage points (0.5 percentage points a year)… In other words boosting housing supply will have a material impact on house prices, but only if sustained over a long period.” 13 The accompanying report by Oxford Economics19 identifies that “To put downward pressure on prices new supply would need to outstrip underlying household formation”. It actually models a boost in housing supply of 100,000 above their baseline forecast of 210,000 dwellings per annum, concluding that 310,000 dpa “helps to keep prices in check” up to 2026, albeit still rising marginally. Although no corresponding analysis is presented on the affordability ratio (i.e. accounting for changes in income over that period), the adoption of 310,000dpa as a figure to keep prices in check would represent a 44.2% uplift over the demographic baseline suggested by the 2014-based projections. A lower percentage would be sufficient to hold affordability constant if household incomes increased in a corresponding manner.

18 ‘The Redfern Review into the decline of home ownership’ (16 November 2016) - http://www.redfernreview.org/wp- content/uploads/2016/01/TW082_RR_online_PDF.pdf 19 ‘Forecasting UK house prices and home ownership’ (November 2016) Oxford Economics - http://www.redfernreview.org/wp- content/uploads/2016/11/20161114-Redfern-Review-modelling-paper.pdf

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Appendix B – OBR outputs

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650

607

dpa

dpa

14,300

13,354

Total

2014-36

Total

2014-36

11.5

11.2

11.4

10.5

12.0

11.7

11.8

10.9

2036

3.7%

4.6%

2036

-3.8%

50,663

49,717

£42,385

£43,333

£54,847

£59,324

£487,418

£623,441

£506,700

£648,105

11.4

11.2

11.3

10.4

11.8

11.6

11.7

10.8

2035

3.7%

4.6%

2035

-3.7%

49,941

49,045

£40,887

£41,801

£52,909

£57,228

£466,621

£596,840

£484,321

£619,480

11.3

11.1

11.2

10.4

11.7

11.5

11.6

10.7

2034

3.7%

4.6%

2034

-3.5%

49,218

48,372

£39,443

£40,324

£51,039

£55,206

£446,729

£571,398

£462,930

£592,120

11.2

11.0

11.1

10.3

11.6

11.4

11.5

10.6

2033

3.7%

4.6%

2033

-3.3%

48,496

47,700

£38,049

£38,899

£49,236

£53,255

£427,704

£547,063

£442,484

£565,968

11.2

10.9

11.0

10.2

11.5

11.3

11.4

10.5

2032

3.7%

4.6%

2032

-3.2%

47,774

47,027

£36,704

£37,525

£47,496

£51,373

£409,507

£523,789

£422,941

£540,971

11.1

10.8

10.9

10.1

11.4

11.2

11.3

10.4

2031

3.7%

4.6%

2031

-3.0%

47,052

46,355

£35,407

£36,199

£45,817

£49,558

£392,103

£501,527

£404,261

£517,078

11.0

10.8

10.9

10.0

11.3

11.1

11.2

10.3

2030

3.7%

4.6%

2030

-2.8%

46,329

45,682

£34,156

£34,920

£44,198

£47,807

£375,456

£480,235

£386,406

£494,240

10.9

10.7

10.8

10.0

11.2

11.0

11.1

10.2

2029

3.7%

4.6%

2029

-2.7%

45,607

45,010

£32,949

£33,686

£42,636

£46,117

£359,534

£459,870

£369,340

£472,411

9.9

10.8

10.6

10.7

11.1

10.9

11.0

10.1

2028

3.7%

4.6%

2028

-2.5%

44,885

44,337

£31,785

£32,495

£41,130

£44,488

£344,306

£440,391

£353,027

£451,547

9.8

10.8

10.5

10.6

11.0

10.8

10.9

10.1

2027

3.7%

4.6%

2027

-2.3%

44,163

43,665

£30,662

£31,347

£39,676

£42,915

£329,740

£421,760

£337,435

£431,603

9.8

10.7

10.4

10.6

10.9

10.7

10.8

10.0

2026

3.7%

4.6%

2026

-2.1%

43,440

42,992

£29,578

£30,239

£38,274

£41,399

£315,808

£403,941

£322,532

£412,541

9.7

9.9

10.6

10.4

10.5

10.8

10.6

10.7

2025

3.7%

4.6%

2025

-1.9%

42,718

42,320

£28,533

£29,171

£36,922

£39,936

£302,483

£386,897

£308,287

£394,320

9.6

9.8

10.5

10.3

10.4

10.7

10.5

10.6

2024

3.7%

4.6%

2024

-1.7%

41,996

41,647

£27,525

£28,140

£35,617

£38,525

£289,739

£370,596

£294,671

£376,904

9.6

9.7

10.5

10.2

10.3

10.6

10.4

10.5

2023

3.7%

4.6%

2023

-1.5%

41,274

40,975

£26,552

£27,146

£34,359

£37,163

£277,549

£355,005

£281,656

£360,258

9.5

9.6

10.4

10.2

10.3

10.5

10.3

10.4

2022

3.7%

4.6%

2022

-1.2%

40,551

40,302

£25,614

£26,186

£33,144

£35,850

£265,890

£340,092

£269,216

£344,346

9.4

9.5

10.3

10.1

10.2

10.4

10.2

10.3

2021

3.7%

4.6%

2021

-1.0%

39,829

39,630

£24,709

£25,261

£31,973

£34,583

£254,739

£325,829

£257,326

£329,138

9.4

9.4

10.2

10.0

10.1

10.3

10.1

10.2

2020

3.7%

4.6%

2020

-0.8%

39,107

38,957

£23,836

£24,368

£30,843

£33,361

£244,074

£312,188

£245,961

£314,601

9.9

9.3

9.3

577

234

181

162

10.2

10.1

10.2

10.0

10.1

2019

3.5%

4.6%

2019

-0.5%

38,385

38,285

£22,993

£23,507

£29,753

£32,182

£233,874

£299,142

£235,097

£300,706

9.9

9.2

9.9

9.2

10.1

10.0

10.1

10.0

2018

3.0%

4.5%

2018

-0.3%

37,662

37,612

£22,215

£22,712

£28,747

£31,094

2016/17

2015/16

2014/15

£224,119

£286,664

£224,714

£287,425

9.8

9.9

9.1

9.8

9.9

9.1

10.0

10.0

0.0%

2.8%

4.4%

2017

2017

36,940

36,940

£21,564

£22,046

£27,904

£30,182

£215,000

£275,000

£215,000

£275,000

Completions2014-17

9.4

9.0

9.5

8.8

9.4

9.0

9.5

8.8

0.0%

2.6%

3.7%

2016

2016

36,706

36,706

£20,751

£21,760

£26,348

£28,252

£195,000

£250,000

£195,000

£250,000

8.6

8.5

8.9

7.8

8.6

8.5

8.9

7.8

672

607

0.0%

2.6%

6.5%

2015

2015

36,525

36,525

Annual

£20,406

£20,649

£25,775

£29,418

£175,000

£229,998

£175,000

£229,998

Actual completions 2016/17

8.6

8.1

8.5

7.5

8.6

8.1

8.5

7.5

722

650

2014

2014

Total

36,363

14,300

36,363

36,940

12,777

13,354

£18,434

£19,441

£24,242

£27,419

£158,000

£205,000

£158,000

£205,000

Workplace ratio Workplace

Residentratio

HousePrices

Workplace ratio Workplace

Residentratio

HousePrices

Workplace ratio Workplace

Residentratio

Workplace earningsWorkplace

Residentearnings

HousePrices

Workplace ratio Workplace

Residentratio

Workplace earningsWorkplace

Residentearnings

HousePrices

Post-2022

Earnings (OBR) Earnings

Post-2021

Houseprices(OBR)

Dwellings

NewQuartile…Lower

NewMedian…

Effect on pricesEffecton

Residual2018-37

Total dwellingsTotal 2014-36

Dwellings(input) pa

Lower QuartileLower

Median

Growth assumptions Growth

Baselineassumptions

Dwellingsin2017

Residual2018-37 Demo needDemo 2014-36

BASELINE

Pg 23/26 Lichfields.uk 15907947v1

920

790

700

dpa

dpa

dpa

20,240

17,380

15,400

Total

2014-36

Total

2014-36

Total

2014-36

8.6

8.5

8.5

7.9

9.8

9.9

9.2

10.0

11.0

10.7

10.8

10.0

2036

2036

2036

-8.2%

56,603

53,743

51,763

-27.7%

-16.2%

£366,340

£468,575

£424,637

£543,140

£464,996

£594,762

8.7

8.5

8.6

7.9

9.8

9.9

9.1

10.0

10.9

10.7

10.8

10.0

2035

2035

2035

-7.9%

55,568

52,859

50,983

-26.6%

-15.6%

£355,479

£454,682

£408,991

£523,129

£446,039

£570,515

8.7

8.6

8.6

8.0

9.8

9.9

9.1

9.9

10.0

10.8

10.6

10.7

2034

2034

2034

-7.6%

54,533

51,974

50,203

-25.5%

-14.9%

£345,003

£441,283

£393,982

£503,931

£427,891

£547,303

8.8

8.6

8.7

8.0

9.8

9.9

9.1

9.9

10.0

10.8

10.6

10.7

2033

2033

2033

-7.2%

53,498

51,090

49,423

-24.3%

-14.2%

£334,900

£428,361

£379,584

£485,514

£410,518

£525,081

8.9

8.7

8.8

8.1

9.7

9.9

9.1

9.8

10.0

10.7

10.5

10.6

2032

2032

2032

-6.9%

52,463

50,206

48,642

-23.1%

-13.5%

£325,157

£415,899

£365,770

£467,846

£393,887

£503,809

8.9

8.7

8.8

8.1

9.7

9.8

9.1

9.8

10.0

10.7

10.4

10.6

2031

2031

2031

-6.5%

51,429

49,321

47,862

-21.9%

-12.8%

£315,762

£403,881

£352,519

£450,896

£377,966

£483,444

9.0

8.8

8.9

8.2

9.9

9.7

9.8

9.1

9.7

10.6

10.4

10.5

2030

2030

2030

-6.1%

50,394

48,437

47,082

-20.6%

-12.1%

£306,701

£392,292

£339,806

£434,635

£362,724

£463,949

9.0

8.8

8.9

8.3

9.9

9.7

9.8

9.1

9.7

10.6

10.3

10.4

2029

2029

2029

-5.7%

49,359

47,552

46,302

-19.3%

-11.3%

£297,965

£381,118

£327,610

£419,035

£348,133

£445,286

9.1

8.9

9.0

8.3

9.9

9.7

9.8

9.1

9.6

10.5

10.3

10.4

2028

2028

2028

-5.3%

48,324

46,668

45,522

-18.0%

-10.5%

£289,542

£370,344

£315,909

£404,070

£334,164

£427,419

9.2

9.0

9.1

8.4

9.9

9.7

9.8

9.1

9.6

10.5

10.2

10.3

2027

2027

2027

-9.7%

-4.9%

47,289

45,784

44,742

-16.6%

£281,420

£359,956

£304,685

£389,714

£320,792

£410,315

9.2

9.0

9.1

8.5

9.9

9.7

9.8

9.1

9.5

10.4

10.2

10.3

2026

2026

2026

-8.9%

-4.5%

46,254

44,899

43,961

-15.2%

£273,591

£349,942

£293,918

£375,942

£307,990

£393,941

9.3

9.1

9.2

8.5

9.9

9.7

9.8

9.1

9.5

10.4

10.1

10.2

2025

2025

2025

-8.0%

-4.1%

45,219

44,015

43,181

-13.7%

£266,045

£340,290

£283,589

£362,730

£295,735

£378,266

9.4

9.2

9.3

8.6

9.9

9.7

9.8

9.1

9.4

10.3

10.1

10.2

2024

2024

2024

-7.1%

-3.6%

44,184

43,131

42,401

-12.2%

£258,771

£330,986

£273,681

£350,058

£284,004

£363,261

9.5

9.3

9.4

8.7

9.9

9.7

9.8

9.1

9.4

10.3

10.0

10.2

2023

2023

2023

-6.2%

-3.2%

43,149

42,246

41,621

-10.6%

£251,761

£322,020

£264,178

£337,901

£272,773

£348,896

9.6

9.4

9.5

8.7

9.7

9.8

9.1

9.3

10.0

10.2

10.0

10.1

2022

2022

2022

-9.0%

-5.3%

-2.7%

42,114

41,362

40,841

£245,007

£313,381

£255,062

£326,242

£262,023

£335,146

9.7

9.4

9.5

8.8

9.8

9.9

9.1

9.3

10.0

10.2

10.0

10.1

2021

2021

2021

-7.3%

-4.3%

-2.2%

41,080

40,477

40,061

£238,500

£305,058

£246,319

£315,059

£251,732

£321,983

9.7

9.5

9.6

8.9

9.8

9.9

9.1

9.9

9.3

10.0

10.1

10.0

2020

2020

2020

-5.6%

-3.3%

-1.7%

40,045

39,593

39,280

£232,231

£297,040

£237,934

£304,334

£241,881

£309,383

9.8

9.6

9.7

9.0

9.8

9.9

9.1

9.9

9.2

10.0

10.1

10.0

2019

2019

2019

-3.8%

-2.2%

-1.1%

39,010

38,709

38,500

£226,195

£289,319

£229,892

£294,049

£232,452

£297,323

9.9

9.7

9.8

9.1

9.8

9.9

9.1

9.8

9.9

9.2

10.0

10.1

2018

2018

2018

-1.9%

-1.1%

-0.6%

37,975

37,824

37,720

£220,383

£281,886

£222,182

£284,186

£223,427

£285,779

9.8

9.9

9.1

9.8

9.9

9.1

9.8

9.9

9.1

10.0

10.0

10.0

0.0%

0.0%

0.0%

2017

2017

2017

36,940

36,940

36,940

£215,000

£275,000

£215,000

£275,000

£215,000

£275,000

9.4

9.0

9.5

8.8

9.4

9.0

9.5

8.8

9.4

9.0

9.5

8.8

0.0%

0.0%

0.0%

2016

2016

2016

36,706

36,706

36,706

£195,000

£250,000

£195,000

£250,000

£195,000

£250,000

8.6

8.5

8.9

7.8

8.6

8.5

8.9

7.8

8.6

8.5

8.9

7.8

0.0%

0.0%

0.0%

2015

2015

2015

36,525

36,525

36,525

£175,000

£229,998

£175,000

£229,998

£175,000

£229,998

Return to 2014 by 2036 by 2014 to Return

Maintain at 2017 level2036 to 2017 at Maintain

8.6

8.1

8.5

7.5

8.6

8.1

8.5

7.5

8.6

8.1

8.5

7.5

920

884

790

780

700

2014

2014

2014

1,035

36,363

20,240

36,363

17,380

36,363

15,400

£158,000

£205,000

£158,000

£205,000

£158,000

£205,000

Workplace ratio Workplace

Residentratio

HousePrices

Workplace ratio Workplace

Residentratio

HousePrices

Workplace ratio Workplace

Residentratio

HousePrices

Workplace ratio Workplace

Residentratio

HousePrices

Workplace ratio Workplace

Residentratio

HousePrices

Workplace ratio Workplace

Residentratio

HousePrices

NewQuartile…Lower

NewMedian…

Effect on pricesEffecton

Residual2018-37

Total dwellingsTotal 2014-36

Dwellings(input) pa

NewQuartile…Lower

NewMedian…

Effect on pricesEffecton

Residual2018-37

Total dwellingsTotal 2014-36

Dwellings(input) pa

NewQuartile…Lower

NewMedian…

Effect on pricesEffecton

Residual2018-37

Total dwellingsTotal 2014-36 Dwellings(input) pa

Pg 24/26 Lichfields.uk 15907947v1

Appendix C – Uplifts applied elsewhere

Table 7 Market Signals uplifts applied in other locations Market Signals LQ Affordability LPA SHMA/Inspector's Report Uplift Ratio (2017) Eastleigh Inspector's Report 10% 10.5 Canterbury SHMA & Inspector's Report 20% 11.77 Cambridge SHMA 30% 14.22 South Cambridgeshire SHMA 10% 11.38 High Peak SHMA & Inspector's Report 5% 7.17 Braintree SHMA 15% 11.33 Chelmsford SHMA 20% 12.44 Sefton Inspector's Report 0% 6.56 Uttlesford Inspector's Report 10% 14.75 Aylesbury Vale SHMA 10% 11.96 Chiltern SHMA 20% 17.95 South Bucks SHMA 20% 14.72 Wycombe SHMA 20% 12.03 Uttlesford SHMA 20% 14.75 East Hertfordshire SHMA 20% 14.01 Harlow SHMA 20% 10.81 Epping Forest SHMA 20% 16.08 Stevenage SHMA 10% 10.37 North Hertfordshire SHMA 10% 12.14 Bristol SHMA 7.50% 9.53 North Somerset SHMA 7.50% 9.06 South Gloucestershire SHMA 7.50% 9 Tamworth Inspector's Report 5% 6.98 Mid Sussex Inspector's Report 20% 13.82 Crawley Inspector's Report 10% 10.85 Waverley Inspector's Report 25% 14.71

Source: Lichfields.

Note: only includes those where a flat rate uplift has been applied/concluded, rather than those where market signals uplift was not explicitly considered/applied or where an alternative approach – e.g. headship adjustments – were applied. It is also possible that the ratios in these areas have changed slightly since judgments about the appropriate scale of uplift was made.

Pg 25/26 Lichfields.uk 15907947v1

Figure 6 Market Signals uplifts applied in other locations

20 18 16 14 12 10 8 6 4

2 LQ Affordability LQ Affordability Ratio (Workplace) 2017 0 0% 5% 10% 15% 20% 25% 30% Uplift

Source: Lichfields

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