Isle of Wight - Strategic Housing Market Assessment

Final Report

Isle of Wight Council

June 2014

Prepared by

GL Hearn Limited 20 Soho Square London W1D 3QW

T +44 (0)20 7851 4900 F +44 (0)20 7851 4910 glhearn.com

Isle of Wight - Strategic Housing Market Assessment, Final Report, June 2014

Contents

Section Page

EXECUTIVE SUMMARY 9

1 INTRODUCTION 13

2 DEFINING THE HOUSING MARKET AREA 15

3 POLICY CONTEXT 35

4 STOCK AND SUPPLY TRENDS 45

5 HOUSING MARKET DYNAMICS AND MARKET SIGNALS 53

6 ASSESSING FUTURE HOUSING REQUIREMENTS 75

7 AFFORDABLE HOUSING NEEDS 89

8 REQUIREMENTS FOR DIFFERENT SIZES AND TYPES OF HOMES 117

9 HOUSING NEEDS OF SPECIFIC GROUPS IN THE POPULATION 129

10 CONCLUSIONS AND RECOMMENDATIONS 153

List of Figures

FIGURE 1: TRENDS IN HOUSE PRICES, 2009-13 18

FIGURE 2: HOUSING SUB-MARKETS DEFINED IN THE 2007 SHMA 20

FIGURE 3: MSOA AVERAGE TRAVEL TO WORK DISTANCES – NEWPORT 21

FIGURE 4: MSOA AVERAGE TRAVEL TO WORK DISTANCES – RYDE 22

FIGURE 5: MSOA AVERAGE TRAVEL TO WORK DISTANCES – THE BAY 22

FIGURE 6: AVERAGE PRICE DIFFERENTIAL COMPARISON – 4-DIGIT POSTCODES, APRIL 2013 23

FIGURE 7: PRIMARY SCHOOLS LOCATED BY PARISH 2013 24

FIGURE 8: SECONDARY AND COLLEGE PROVISION LOCATED BY PARISH 2013 25

FIGURE 9: % EMPLOYED IN LOWER-SKILLED JOBS 26

FIGURE 10: % EMPLOYED IN HIGHER-SKILLED JOBS 27

FIGURE 11: PERCENTAGE OF ECONOMICALLY-ACTIVE RESIDENTS BY PARISH 28

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FIGURE 12: RETIRED RESIDENTS AS A PROPORTION OF ALL HOUSEHOLDS BY PARISH 29

FIGURE 13: UNEMPLOYED RESIDENTS AS A PROPORTION OF RESIDENTS PER PARISH 30

FIGURE 14: COUNCIL TAX BANDS A-E IN 2007 31

FIGURE 15: COUNCIL TAX BANDS F-H IN 2007 31

FIGURE 16: 2013 HOUSING SUB-MARKETS 33

FIGURE 17: CHANGE IN TENURE PROFILE CORE IOW, 2001 – 2011 47

FIGURE 18: LOCATION OF EMPTY PROPERTIES ON THE ISLAND, SEPT 2013 51

FIGURE 19: UNDERSTANDING FUTURE HOUSING DEMAND 53

FIGURE 20: UK ECONOMIC GROWTH, 2007-2013 55

FIGURE 21: TRENDS IN GROSS MORTGAGE LENDING 56

FIGURE 22: TRENDS IN MORTGAGE APPROVALS BY TYPE, UK 2011-2013 57

FIGURE 23: BASE INTEREST RATES 58

FIGURE 24: MEDIAN HOUSE PRICE TRENDS, 1998 – 2007 59

FIGURE 25: MEDIAN HOUSE PRICE TRENDS, 2007-2012 (Q3) 60

FIGURE 26: SEASONALLY ADJUSTED AVERAGE HOUSE PRICES, ISLE OF WIGHT 61

FIGURE 27: MEDIAN HOUSE PRICES BY TYPE – LOCAL AUTHORITIES (DEC 2012- NOV 2013) 62

FIGURE 28: INDEXED SALES TRENDS – 1998-2011 63

FIGURE 29: INDEXED SALES TRENDS, 2006-13 64

FIGURE 30: PERCENTAGE OF SALES BY TYPE DEC 2012-NOV 2013 65

FIGURE 31: MEDIAN MONTHLY RENTAL LEVELS – 2011 - 2013 65

FIGURE 32: LOWER QUARTILE AFFORDABILITY (PRICE/INCOME) – (1997 - 2012) 67

FIGURE 33: GROWTH IN DWELLING STOCK, 2001-12 72

FIGURE 34: NET COMPLETIONS 2001-2013 72

FIGURE 35: ENTRY-LEVEL PURCHASE PRICE AND PRIVATE RENT 92

FIGURE 36: VOLUME OF PROPERTIES ADVERTISED FOR SALE AND RENT 93

FIGURE 37: DISTRIBUTION OF HOUSEHOLD INCOME – ISLE OF WIGHT 96

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FIGURE 38: OVERVIEW OF BASIC NEEDS ASSESSMENT MODEL 98

FIGURE 39: OVERLAP BETWEEN AFFORDABLE HOUSING TENURES 112

FIGURE 40: APPROACH TO HOUSING MARKET MODELLING 118

FIGURE 41: AVERAGE BEDROOMS BY AGE, SEX AND TENURE – ISLE OF WIGHT 119

FIGURE 42: IMPACT OF DEMOGRAPHIC TRENDS ON AFFORDABLE HOUSING NEED BY HOUSE SIZE, 2011 TO 2036 – ISLE OF WIGHT 122

FIGURE 43: IMPACT OF DEMOGRAPHIC TRENDS ON MARKET HOUSING NEED BY HOUSE SIZE, 2011 TO 2036 – ISLE OF WIGHT 123

FIGURE 44: TENURE OF OLDER PERSON HOUSEHOLDS – ISLE OF WIGHT 132

FIGURE 45: OCCUPANCY RATING OF OLDER PERSON HOUSEHOLDS – ISLE OF WIGHT 133

FIGURE 46: POPULATION WITH LTHPD IN EACH AGE BAND 137

FIGURE 47: CHANGES IN THE BME POPULATION 2001 TO 2011 – ISLE OF WIGHT 140

FIGURE 48: POPULATION AGE PROFILE BY ETHNIC GROUP (2011) 141

FIGURE 49: TENURE BY ETHNIC GROUP – ISLE OF WIGHT 142

FIGURE 50: OCCUPANCY RATING BY ETHNIC GROUP – ISLE OF WIGHT 143

FIGURE 51: TENURE OF HOUSEHOLDS WITH DEPENDENT CHILDREN – ISLE OF WIGHT 144

FIGURE 52: OCCUPANCY RATING AND HOUSEHOLDS WITH DEPENDENT CHILDREN 145

FIGURE 53: TENURE BY AGE OF HRP – ISLE OF WIGHT 146

FIGURE 54: ECONOMIC ACTIVITY BY AGE (PEOPLE) – ISLE OF WIGHT 147

List of Tables

TABLE 1: MAIN NET MIGRATION FLOWS TO/ FROM ISLE OF WIGHT, 2010-11 17

TABLE 2: PARISHES AND ‘BEST FIT’ WARDS WITHIN EACH SUB-MARKET 34

TABLE 3: HOUSEHOLDS (2011) 45

TABLE 4: TENURE PROFILE - DWELLINGS, 2012 45

TABLE 5: TENURE, CENSUS 2011 46

TABLE 6: GROWTH IN HOUSEHOLDS (2001-2011) 46

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TABLE 7: ACCOMMODATION TYPE - HOUSEHOLDS (QS402EW), 2011 47

TABLE 8: NUMBER OF BEDROOMS (QS411EW) CENSUS 2011 48

TABLE 9: KEY FIGURES FOR HOUSING, CENSUS 2011 49

TABLE 10: OVERCROWDING, 2011 – BEDROOM STANDARD 49

TABLE 11: CHANGES IN OVERCROWDING USING OCCUPANCY RATING, 2001-11 50

TABLE 12: COMPARISON OF HOUSE PRICE CHANGES 61

TABLE 13: MONTHLY MEDIAN RENTAL COSTS BY SIZE (DEC 2013) 66

TABLE 14: COMPARISON OF MEDIAN AND LOWER QUARTILE AFFORDABILITY, 2011-2012 67

TABLE 15: OVERCROWDING, 2011 70

TABLE 16: CHANGES IN OVERCROWDING (2001-2011) – BASED ON ROOM STANDARD 71

TABLE 17: VACANT AND SECOND HOMES, 2011 71

TABLE 18: HOUSING COMPLETIONS 73

TABLE 19: PROJECTED ISLAND HOUSEHOLD GROWTH 2008-33 – CLG 2008- BASED HOUSEHOLD PROJECTIONS 76

TABLE 20: PROJECTED ISLAND HOUSEHOLD GROWTH 2011-21 – CLG 2011- BASED HOUSEHOLD PROJECTIONS 77

TABLE 21: PROJECTED ISLAND HOUSEHOLD GROWTH 2011-36 – PROJ 1 ADJUSTED SNPP-BASED HOUSEHOLD PROJECTIONS 79

TABLE 22: PROJECTED ISLAND HOUSEHOLD GROWTH 2011-36 – PROJ 2 ADJUSTED SNPP-BASED HOUSEHOLD PROJECTIONS WITH 2008 HEADSHIP ASSUMPTIONS 80

TABLE 23: PROJECTED ISLAND HOUSEHOLD GROWTH 2011-36 – PROJ 3 ADJUSTED SNPP-BASED HOUSEHOLD PROJECTIONS WITH MIDPOINT HEADSHIP ASSUMPTIONS 81

TABLE 24: PAST TRENDS IN NET MIGRATION 82

TABLE 25: PROJECTED ISLAND HOUSEHOLD GROWTH 2011-36 – PROJ 4 (10 YR MIGRATION TREND) AND PROJ 5 (5 YR MIGRATION TREND) 83

TABLE 26: EMPLOYMENT GROWTH ASSUMPTIONS USED IN MODELLING 86

TABLE 27: FORECAST EMPLOYMENT GROWTH BY SECTOR, 2011-30 86

TABLE 28: PROJECTED ISLAND HOUSEHOLD GROWTH 2011-36 – PROJ A (JOBS BASELINE) AND PROJ B (RESIDENTS IN EMPLOYMENT) 87

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TABLE 29: MAXIMUM LHA PAYMENTS BY SIZE 94

TABLE 30: MONTHLY AVERAGE SOCIAL RENT LEVELS – ISLE OF WIGHT 94

TABLE 31: INDICATIVE INCOME REQUIRED TO PURCHASE/RENT WITHOUT ADDITIONAL SUBSIDY 95

TABLE 32: INCOME LEVELS BY SUB-AREA 97

TABLE 33: ESTIMATED PROPORTION OF HOUSEHOLD UNABLE TO AFFORD MARKET HOUSING WITHOUT SUBSIDY 98

TABLE 34: ESTIMATED NUMBER OF HOUSEHOLDS IN UNSUITABLE HOUSING 100

TABLE 35: ESTIMATED BACKLOG NEED BY SUB-AREA 100

TABLE 36: ESTIMATED LEVEL OF HOUSING NEED FROM NEWLY FORMING HOUSEHOLDS (PER ANNUM) 102

TABLE 37: ESTIMATED LEVEL OF HOUSING NEED FROM EXISTING HOUSEHOLDS (PER ANNUM) 103

TABLE 38: ESTIMATED FUTURE HOUSING NEED (PER ANNUM) 103

TABLE 39: ANALYSIS OF PAST SOCIAL/AFFORDABLE RENTED HOUSING SUPPLY (PER ANNUM - PAST 3 YEARS) 104

TABLE 40: SUPPLY OF AFFORDABLE HOUSING BY SUB-MARKET 105

TABLE 41: ESTIMATED LEVEL OF HOUSING NEED (2011-36) 105

TABLE 42: ESTIMATED LEVEL OF HOUSING NEED (PER ANNUM) 106

TABLE 43: ANNUAL NEED FOR AFFORDABLE HOUSING (INCLUDING DEVELOPMENT PIPELINE) 107

TABLE 44: PROPORTION OF HOUSEHOLDS WHO CANNOT AFFORD MARKET HOUSING BY INCOME CATEGORY 113

TABLE 45: NET AFFORDABLE NEED WITHIN DIFFERENT AFFORDABILITY CATEGORIES 114

TABLE 46: NET NEED IN DIFFERENT AFFORDABILITY CATEGORIES (PERCENTAGES) 115

TABLE 47: ESTIMATED PROFILE OF DWELLINGS IN 2011 BY SIZE 120

TABLE 48: MODELLED SIZE OF DWELLINGS NEEDED FOR THE HMA 2011 TO 2036 – AFFORDABLE HOUSING 121

TABLE 49: MODELLED SIZES OF DWELLINGS NEEDED 2011 TO 2036 – MARKET HOUSING 123

TABLE 50: DEMOGRAPHICALLY-DRIVEN NEED FOR DIFFERENT SIZES OF HOMES, 2011 TO 2036 124

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TABLE 51: SETTLEMENT LEVEL ESTIMATES OF DWELLING SIZES (2011-36): FUTURE MARKET HOUSING 126

TABLE 52: SETTLEMENT LEVEL ESTIMATES OF DWELLING SIZES (2011-36): FUTURE AFFORDABLE HOUSING 126

TABLE 53: INDICATIVE NEED FOR DIFFERENT SIZES OF HOMES (2011-36) 127

TABLE 54: OLDER PERSON POPULATION (2011) 131

TABLE 55: PROJECTED CHANGE IN POPULATION OF OLDER PERSONS (2011 TO 2036) 131

TABLE 56: PENSIONER HOUSEHOLDS (CENSUS 2011) 132

TABLE 57: PENSIONER HOUSEHOLDS WITH OCCUPANCY RATING OF +2 OR MORE BY TENURE 134

TABLE 58: ESTIMATED POPULATION CHANGE FOR RANGE OF HEALTH ISSUES (2011 TO 2036) 134

TABLE 59: ESTIMATED REQUIREMENT FOR SPECIALIST (EXTRA-CARE) HOUSING (2011-36) 136

TABLE 60: HOUSEHOLDS AND PEOPLE WITH LONG-TERM HEALTH PROBLEM OR DISABILITY (2011) 136

TABLE 61: ESTIMATED POPULATION CHANGE IN POPULATION WITH LEARNING DISABILITIES 138

TABLE 62: ESTIMATED POPULATION CHANGE IN POPULATION WITH MODERATE OR SERIOUS PHYSICAL DISABILITY 138

TABLE 63: ESTIMATED POPULATION CHANGE IN POPULATION WITH MENTAL HEALTH PROBLEMS (THOSE AGED 18-64) 138

TABLE 64: BLACK AND MINORITY ETHNIC POPULATION (2011) 139

TABLE 65: HOUSEHOLDS WITH DEPENDENT CHILDREN (2011) 143

TABLE 66: HOUSEHOLDS WITH NON-DEPENDENT CHILDREN (2011) 146

TABLE 67: INDICATIVE NEED FOR DIFFERENT DWELLING SIZES (2011-36) 157

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Quality Standards Control

The signatories below verify that this document has been prepared in accordance with our quality control requirements. These procedures do not affect the content and views expressed by the originator.

This document must only be treated as a draft unless it is has been signed by the Originators and approved by a Business or Associate Director.

DATE ORIGINATORS APPROVED June 2014 Justin Gardner, JGC Nick Ireland Paul McColgan, Associate Director Planning Director

Limitations This document has been prepared for the stated objective and should not be used for any other purpose without the prior written authority of GL Hearn; we accept no responsibility or liability for the consequences of this document being used for a purpose other than for which it was commissioned.

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EXECUTIVE SUMMARY

The Isle of Wight Strategic Housing Market Assessment (SHMA) 2014 considers the requirement for both market and affordable homes over the period to 2036. It considers how many homes might be required in the future, what mix of homes – both market and affordable – and the requirement for specialist housing. It has been prepared to inform the review of the strategic housing policy (Policy SP2) in the Island Plan Core Strategy and the review of the Isle of Wight Council’s Housing Strategy.

The SHMA provides an evidence base to help the Council develop future policies for housing. It does not set housing targets or policy in itself.

This SHMA summary focusses on considering how many homes are required. The SHMA has been prepared by GL Hearn and JG Consulting supported with data from the Isle of Wight Council.

Context: National Planning Policy and Guidance

The National Planning Policy Framework (NPPF) 1 requires the Council to undertake an objective assessment of the requirement for market and affordable housing on the Island. In doing so the SHMA follows the approach recommended by Government in its draft Planning Practice Guidance.2 This sets out that the latest official household projections should be seen as the starting point for identifying housing requirements; but that wider evidence should then be considered to examine:

 whether there is evidence that household formation has been suppressed;  whether the official projections will meet identified need for affordable housing;  whether they will support forecast growth in employment; and  whether additional homes should be provided to improve affordability.

These wider ‘tests’ may provide a basis for considering increasing levels of housing provision. The SHMA has considered these issues, and is consistent in its approach to the South Hampshire Strategic Housing Market Assessment3.

Population and Household Projections

Government’s 2008-based Household Projections suggested an annual growth in households on the Island of 824 per year between 2008-33. These have now been superseded by 2011-based Interim Household Projections, published in April 2013, which take account of the 2011 Census. These suggest a lower level of growth in households, of 564 per year between 2011-21.

1 CLG (March 2012) National Planning Policy Framework 2 CLG (Oct 2013) Draft Planning Practice Guidance – Assessment of Housing & Economic Development Needs 3 GL Hearn (Nov 2013) South Hampshire Strategic Housing Market Assessment, Version 1

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There are however a number of key issues with the Government’s latest household projections. Firstly they only project household growth to 2021, whereas the Council will need to look at trends beyond this to at least 2036 in reviewing its planning policies. Secondly they do not fully take account of the latest ONS data on population trends.

Thirdly, the evidence suggests that household formation for some key age groups fell between 2001-11 (as a result of both deteriorating affordability of housing since around 2002 and the economic recession from 2008) with the result that they project forward household formation rates which are 22% below those in the previous official projections. It would therefore be difficult to defend using these projections to identify housing requirements to 2036 and beyond.

The SHMA has considered projections based on 5 and 10 year migration trends. These indicate a need for 233 and 471 homes a year respectively. However whilst migration levels to the Island in net terms had been falling the 2004-9 period, the trends since then has been upwards; and moving forwards the ageing of the Island’s population is likely to moderate out-migration meaning that net migration could well rise as the Office for National Statistics projects.

Taking these factors into account, the SHMA has developed an updated projection of housing requirements which takes into account the latest evidence and research. This projection suggests a requirement for 589 additional homes per year in the period to 2036 (0.9% annual growth in the housing stock).This represents the best assessment of housing requirements based on past population trends.

Overlaying Other Factors

Housing market conditions on the Island since 2007 have been influenced by difficulties households have found in accessing mortgage finance and building up a deposit for a home. House prices on the Island are below those in South Hampshire (with the exception of detached properties). Housing affordability, comparing entry-level house prices to local incomes, is better than many parts of the South East region. However there is evidence that younger households working locally have found it difficult to get on the housing ladder. Over the 2001-11 decade the number of households living in private rented accommodation increased by over 4,100 (63%). Increasing the supply of homes over time could help to improve affordability.

Recent economic forecasts4 indicate that the number of jobs on the Island is expected to increase by an average of 130 jobs a year to 2036. Employment growth is expected to be stronger over the initial period to 2021. Assuming that some employment growth can be supported by reducing unemployment and from some people retiring later, the SHMA calculates that between 539-545 homes a year would be needed to support this level of growth in jobs. Economic forecasts are based on multiple assumptions regarding the

4 Prepared by Oxford Economics for the Solent Local Enterprise Partnership

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performance of different economic sectors, and the National Planning Policy Framework does not provide a basis for using economic forecasts to reducing the housing requirement (relative to projections based on past population trends).

The SHMA identifies a net requirement for 304 affordable homes per year over the plan period to enable households in need of affordable housing to access an affordable home5. Some of these households may be able to find suitable accommodation in the Private Rented Sector and claim Local Housing Allowance to supplement their incomes. Other households may choose to spend more than 30% of their gross income on housing costs. However the evidence does suggest that the Council might consider higher housing provision than the 589 homes a year shown by the demographic projections in order to secure stronger delivery of affordable housing.

Conclusions on Housing Requirements

Drawing the range of evidence together, the SHMA that provision of 589 homes per annum reflects a “baseline” level of housing provision to meet objectively-assessed needs.

The Isle of Wight Council might consider, in reviewing its current housing requirement, whether higher housing provision could be supported to increase affordable housing delivery and support improvements in the affordability of market housing. This will however need to be balanced off against issues related to the availability of land for residential development and tested through Sustainability Appraisal.

In reviewing Policy SP2 in the Island Plan Core Strategy, the Council will need to bring together the evidence in the SHMA with consideration of other relevant issues including land supply and infrastructure provision; and the relative sustainability of different options for future development.

The full objectively assessed housing requirements and supporting technical analysis can be found in the main Strategic Housing Market Assessment 2014.

5 To aid comparison with the demographic projections this excludes the expected supply of affordable housing from development schemes with planning consent. This includes 379 affordable homes.

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1 INTRODUCTION

Context

1.1 The purpose of the Strategic Housing Market Assessment (SHMA) is to develop a robust understanding of housing market dynamics, to provide an assessment of future requirements for both market and affordable housing and to provide understanding of the housing requirements of different groups within the population.

1.2 The SHMA responds to and is compliant with the requirements of both the National Planning Policy Framework (the NPPF) and the SHMA Practice Guidance (the Guidance) published by the Department for Communities and Local Government (CLG) in August 2007. It provides an objective assessment of future housing requirements, with the intention that this will inform future development of planning policies, including the review of the Island Plan Core Strategy’s strategic housing policy (Policy SP2), and will inform a review of the Isle of Wight Council Housing Strategy. Authorities are required by Section 110(2) of the Localism Act to “engage constructively, actively and on an on- going basis” with the other authorities identified in undertaking these tasks. The Duty to cooperate is a legal test to which development plans must comply.

1.3 In considering overall housing requirements, the SHMA considers both housing need and demand. It does not set policy targets, and in considering what level of future housing provision to plan for (in reviewing Policy SP2 in the Island Plan Core Strategy), the Isle of Wight Council will need to bring together the evidence in this report with consideration of other relevant issues including land supply and infrastructure provision; and the relative sustainability of different options for future development. The SHMA provides a starting point for this in setting out specific evidence and analysis of need and demand for homes. It also provides an evidence base assessing the need for different sizes of homes and the need for different types of housing. This can be used to inform the Council’s engagement with landowners and developers in regard to proposals for new development on the Island.

1.4 The SHMA has been developed by GL Hearn and Justin Gardner Consulting (JGC) and commissioned by the Isle of Wight Council (IWC) Housing and Planning Services.

1.5 The SHMA has been informed by stakeholder engagement ‘on the ground’ including discussions with local estate and letting agents on the Island, and key IWC staff.

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Geographies

1.6 The Isle of Wight Council forms part of the Partnership for Urban South Hampshire (PUSH). PUSH is a voluntary partnership of ten local authorities6. GL Hearn have recently prepared a Strategic Housing Market Assessment for the Southampton and Portsmouth Housing Market Areas on behalf of the PUSH Partnership. It has separately prepared an SHMA covering New Forest District. This SHMA builds on these studies within the intention of providing a consistent evidence base for housing provision for the authorities across the PUSH area.

1.7 The PUSH SHMA (GL Hearn, January 2014)7 confirms that the Isle of Wight is a separate housing market area in its own right. This has been agreed with the local authorities within the PUSH Partnership.

Report Structure

1.8 The remainder of this report is structured in the following way

 Chapter 2: Defining the Housing Market Area  Chapter 3: Policy Context  Chapter 4: Stock and Supply Trends  Chapter 5: Housing Market Dynamics and Market Signals  Chapter 6: Assessing Future Housing Requirements  Chapter 7: Affordable Housing Needs  Chapter 8: Requirements for Different Sizes and Types of Homes  Chapter 9: Housing Needs of Specific Groups in the Population  Chapter 10: Conclusions and Recommendations

6 Portsmouth City Council; Southampton City Council; Havant Borough Council; Gosport Borough Council; Fareham Borough Council; Eastleigh Borough Council; East Hampshire District Council; Test Valley Borough Council; Winchester City Council; New Forest District Council; Hampshire County Council; and Isle of Wight Council 7 GL Hearn (Jan 2014) South Hampshire Strategic Housing Market Assessment, Version 1

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2 DEFINING THE HOUSING MARKET AREA

2.1 The National Planning Policy Framework (NPPF) sets out that to provide a clear understanding of housing requirement in their areas, local authorities should prepare a Strategic Housing Market Assessment working with neighbouring authorities where housing market areas cross administrative boundaries. The starting point for the SHMA is therefore to consider the extent of the relevant housing market area.

Approach to Defining Housing Market Areas

2.2 The draft Planning Practice Guidance 8 defines a housing market area as a geographical area defined by household demand and preferences for all types of housing, reflecting the key functional linkages between places where people live and work.

2.3 The guidance indicates that local planning authorities can use a combination of approaches to identify relevant housing market areas, recognising that there is no single comprehensive source of information. The guidance suggests three primary information sources:

 Patterns of house prices and rates of change in house prices, which provides a 'market based' reflection of housing market boundaries  Population and household migration flows, which reflect the preferences and the trade-offs made when choosing housing with different characteristics; and  Contextual data, such as travel to work areas, which reflects the spatial structure of the labour market and the functional relationships between places where people work and live.

2.4 Over the last decade, a considerable body of technical work and analysis has been undertaken to define HMAs across the country.

2.5 The draft Guidance is clear that no single source of information on needs will be comprehensive in identifying the appropriate assessment area; careful consideration should be given to the appropriateness of each source of information and how they relate to one another.

Previous Research to Defining Housing Market Areas

CLG National Study on Geography of Housing Markets in England

2.6 CLG published research in 20109 which sought to consider the geographies of housing markets across England. This academic-driven project considered commuting and migration dynamics, and house prices (standardised for differences in housing mix and neighbourhood characteristics). This was brought together to define a three tiered structure of housing markets, as follows:

 Strategic (Framework) Housing Markets – based on 77.5% commuting self-containment;

8 CLG (2013) Draft Planning Practice Guidance – Assessment of Housing and Economic Development Needs 9 Jones, C., Coombes, M. and Wong, C. (2010) The Geography of Housing Markets in England – Summary Report

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 Local Housing Market Areas – based on 50% migration self-containment; and  Sub-Markets – which would be defined based on neighbourhood factors and house types.

2.7 The CLG research identifies the Isle of Wight as a Strategic (Framework) Housing Market Area. It does not define any more localised housing market areas within this. It also considered whether there was any inter-relation between the housing market areas in South Hampshire and the island. Under each methodology (assessing migration and commuting flows) it found that there was not a close interaction.

Regional Research on Housing Markets in South East England

2.8 A regional study was undertaken by DTZ for the South East Regional Assembly and the Regional Housing Board10 in 2004 to define housing market areas across the South East. This concluded that an Isle of Wight Housing Market existed in its own right.

2007 Isle of Wight Strategic Housing Market Assessment

2.9 The definition of the housing market area was considered further within the Isle of Wight Strategic Housing Market Assessment (2007)11. This concluded that:

 The Island demonstrates a high degree of self-containment in terms of both migration and travel to work patterns  The Island is defined as a separate sub-region in the Regional Economic Strategy. This reflects the geography and the unique economic characteristics of the Island

2.10 It concluded that the Isle of Wight had its own housing market area, which covered the Island. It defined a number of sub-market areas across the Island which are reviewed within this section.

2.11 It is thus relevant to note that all previous research to define housing market areas has identified the Isle of Wight as a housing market area in its own right. Notwithstanding this, this SHMA has sought to review whether this conclusions still ‘holds true’ by interrogating the three primary sources of information identified in the draft Planning Practice Guidance.

Migration Flows

2.12 Migration flows reflect households’ movements between areas, and thus are a key factor in considering the geography of housing markets. The Isle of Wight Council has analysed internal migration flows between local authority areas based on information recorded by the Office for National Statistics (ONS). We have considered both gross and net flows.

10 DTZ (2004) Identifying the Local Housing Markets of the South East 11 http://www.iwight.com/azservices/documents/2782-FB1-Strategic-Housing-Market-Assessment-inc-Housing-Needs-Survey.pdf

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2.13 In terms of gross migration flows, the largest gross flows to the Isle of Wight are 120 persons per year from Portsmouth and 140 persons per year from Southampton12: These flows are modest relative to those between the two cities and other adjoining areas within their respective housing market areas.

2.14 Analysis has also been carried out of net migration flows using data on internal migration between authorities over the 2006-11 period. ONS data13 on net flows are more relevant than gross flows as mutually cancelling flows across the boundaries of adjacent local authorities should have less importance in planning for housing than a substantial net flows in one direction or the other. Table 1 shows the relative inflows and outflows from the Isle of Wight over the 2010/11 financial year showing that interaction is limited between the Portsmouth and Southampton Housing Market Areas and the Isle of Wight.

Table 1: Main Net Migration Flows to/ from Isle of Wight, 2010-11 Net Flows into IOW 2010-11 net flow: Net flows out of IOW 2010-11 net flow: number of people per number of people per annum annum Hillingdon 30 Havant 30 Stockport 20 Cornwall 30 Nottingham 20 Suffolk Coastal 20 Newark and Sherwood 20 Portsmouth 20 Solihull 20 Southampton 20 Walsall 20 Waverley 20 Central Bedfordshire 20 Poole 20 Hertsmere 20 Cardiff 20 Lewisham 20 County Durham 10 Barking and Dagenham 20 Newcastle upon Tyne 10 Bromley 20 Sunderland 10

Source: ONS Internal Migration Statistics

Commuting Dynamics

2.15 The Office for National Statistics (ONS) has defined travel to work areas across the UK based on areas in which generally “at least 75% of an area's resident workforce work in the area and at least 75% of the people who work in the area also live in the area.” The area must also have a working

12 ONS Internal Migration Statistics, 2010/11 inflow UKF6 Top Flows into area ISLE OF Wight UA - http://www.ons.gov.uk/ons/rel/migration1/internal-migration-by-local-authorities-in-england-and-wales/2010-2011/internal-migration-by- local-authorities-in-england-and-wales-in-the-year-ending-june-2011.html

13 ONS's Migration Statistics Unit for 2008-9, 2009-10 and 2010-11. The Table used is 'Table 1: Moves within the United Kingdom; Local Authorities, Regions and Unitary Authorities

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population of at least 3,500. The latest travel to work areas identified by ONS are defined based on commuting data from the 2001 Census.

2.16 The Isle of Wight is defined by ONS as a travel to work area. Based on 2001 Census data, it has a very high level of self-containment (94%), with a modest 1.3% of residents in work commuting to Southampton and 0.9% to Portsmouth. Data on commuting flows from the 2011 Census has yet to be released.

House Prices

2.17 Average house prices have reduced on the Island since the start of 2007 and overall have remained broadly consistent since March 2011. Prices are below those in areas in South Hampshire as a whole and the South East more widely, but above those in Portsmouth, Southampton and Gosport (principally reflecting differences in the mix of properties sold).

2.18 As Figure 1 indicates, price trends over the period since 2009 are broadly similar to those in nearby parts of South Hampshire.

Figure 1: Trends in House Prices, 2009-13

Source: HM Land Registry Price Paid Data

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Conclusions regarding the Housing Market Area

2.19 The above analysis continues to demonstrate that the Isle of Wight represents a housing market area in its own right. This reflects:

 Modest commuting and migration flows to local authorities within South Hampshire;  A high level of commuting self-containment;  Lower relative house prices than areas within South Hampshire.

Socio-Economic Characteristics and Housing Sub-Markets

2.20 Within the Island’s Housing Market a number of sub-markets can be identified. The following structured approach has been used by the Isle of Wight Council to consider and define the sub- markets, considering the degree to which housing sub-markets on the Island are:

 contained within Parishes,  contained within the areas identified in the Island Plan Core Strategy,  contained within the SHMA 2007 identified housing markets;  contained within a different set of locations.

2.21 All of these scenarios have been be tested in combination using a variety of data sources; as well as through consultation with local estate and letting agents.

Housing Sub-Markets defined in the 2007 SHMA

2.22 A review of the 2007 SHMA was carried out to investigate the manner in which the sub markets were identified. Analysis of Self Containment was carried out in relation to Town Centres and a further assessment of travel to work (TTW) data was carried out in relation to rural areas.

2.23 The SHMA concluded that town centres represented a pragmatic starting point for defining sub markets. The island housing markets were defined as follows:

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Figure 2: Housing Sub-Markets defined in the 2007 SHMA

Source: GVA Grimley

Population Turnover Rates

2.24 Population turnover rates are calculated as the rate of in or out migratory moves within England and Wales per 1,000 resident population. A migrant in this context is a person whose postcode of address on June 30 is different from their postcode one year previously. Data provided by the ONS Population Estimates Unit, are shown in the form of a net change between Middle Layer Super Output Areas (MSOAs) in England and Wales per 1,000 resident population.14

2.25 Analysis of this information indicates that patterns of relocation found at MSOA level are low indicating that sub markets are larger or may not match Parish or MSOA boundaries exactly.

Analysis of Other Relevant Datasets

2.26 Further analysis has been carried out using the following data to determine whether the previous approach is still valid:

 Travel to work data

14 Population Turnover Rates – Trends - http://www.neighbourhood.statistics.gov.uk

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 Average property values  Housing Mix  School provision  Socio and Economic Characteristics  Locally available data  Valuation Office data on Council tax Bands

Travel to Work Data

2.27 Available datasets have been mapped from Census 2001 to show the average Travel to Work distances based on Medium Super Output Areas.15 No figures are currently available from the 2011 Census on this topic area.

Figure 3: MSOA Average Travel to work distances – Newport

15 Travel to work data MSOA 2001 Census Data

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Figure 4: MSOA Average Travel to work distances – Ryde

Figure 5: MSOA Average Travel to work distances – The Bay

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2.28 Analysis of these maps shows that people are willing to travel from all areas of the island to Newport, Ryde and Sandown for employment; and in isolation, there are no defined housing markets based on access to employment.

Average Property Values

2.29 An analysis of average house prices in April 2013 was carried out and mapped in terms of four digit postcode areas. 16 This information shows that in broad terms there is a difference in price between locations associated with Newport, Ryde and Sandown. In addition there us a differential between Cowes, Gurnard and Northwood compared to East Cowes and a further marked difference in price in the more rural areas of the island.

Figure 6: Average Price Differential Comparison – 4-digit Postcodes, April 2013

16 Average Prices – Rightmove Market Trends April 2013

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Housing Mix

2.30 Analysis has been undertaken at a Parish Level using 2011 Census data to map the percentage of properties with 1, 2, 3 and 4+ bedrooms17 and is set out in Appendix A. The overall pattern shows a greater concentration of smaller and mid-market housing in the urban areas; and larger homes particularly within rural areas within commuting distance of the main towns and villages.

2.31 Further analysis of the most frequent house type in a parish basis in 2011 indicates that the balance of housing of different types differs across the island, with a concentration of terraced and semi- detached properties in the main towns and rural areas with higher levels of detached and semi- detached properties. In more rural areas, the housing mix is focused more towards detached housing.

School Provision

2.32 Maps of primary schools show a relative correlation between parishes and provision providing good access to primary schools provision across the island.

Figure 7: Primary Schools located by Parish 2013

17 data table Number of Bedrooms, 2011 (QS411EW)

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2.33 Secondary schools and colleges are located in the urban areas on the island. Figure 8 shows that the main concentrations of secondary and college provision are located within Newport, Cowes, Ryde, The Bay and West Wight.

Figure 8: Secondary and College provision located by Parish 2013

Socio-Economic Classification

2.34 Analysis was undertaken into subject areas of the Census 2011 (Occupation and Economic Activity) to examine whether any conclusions could be drawn on defined housing markets.

2.35 The percentage of economically working households who were employed in Caring, Leisure, Sales, Customer Service, Process, Plant and Machine Operatives and Elementary Occupations as a proportion of all usual residents aged 16 to 74 in employment was analysed. This showed a concentration of people employed in lower skilled jobs around West Wight, East Cowes, Newport, Sandown and Shanklin and Wroxall.

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Figure 9: % Employed in Lower-Skilled Jobs

Source: 2011 Census

2.36 Further analysis was undertaken of the same dataset for residents who were employed as Managers, Directors, Senior Officials, Professional Occupations and Associate Professional and Technical Occupations. This showed a greater concentration of people employed in higher-skilled jobs around Shalfleet, Gurnard, Fishbourne and Nettlestone and Seaview.

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Figure 10: % Employed in Higher-Skilled Jobs

Source: 2011 Census

2.37 Analysis was undertaken into the percentage of residents who were economically active as a proportion of all usual residents aged 16-74 by Parish. This showed that the Parishes of Calbourne, Gurnard, Cowes, East Cowes, Godshill, Arreton, Havenstreet and Ashey and Newchurch had the highest concentrations.

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Figure 11: Percentage of Economically-Active Residents by Parish

2.38 Further analyss was undertaken into the percantage of residents within each Parish who were retired. This showed higher concentrations of retired residents in the west of the island, a concentration around Whippingham, Wootton Bridge and Fishbourne and a further concentration around St.Helens, Nettlestone, Seaview and Bembridge.

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Figure 12: Retired Residents as a Proportion of all Households by Parish

2.39 Finally the proportion of unemployed residents per Parish was investigated. Stronger local concentrations of unemployment were found in Ryde, Brading, Sandown, Shanklin, Lake and Ventnor.

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Figure 13: Unemployed Residents as a Proportion of Residents per Parish

Council Tax Valuation Bands

2.41 Analysis of Council Tax data from 2007 (carried out as part of the SHMA 2007) shows the relative split of Council Tax Bands from A-E and F-H. This shows a higher concentration of lower banded accommodation in East Cowes, Newport, Ryde, The Bay and Ventnor.

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Figure 14: Council Tax Bands A-E in 2007

Figure 15: Council Tax Bands F-H in 2007

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Locally available data

2.40 An investigation was undertaken into locally derived information, carried out in the form of background research to housing needs surveys carried out by Wootton Bridge and Gurnard Parish Councils by Consultants CBA and JGConsulting.

2.41 From stakeholder interviews carried out as part of the Wootton Bridge Housing Needs Survey analysis seems to indicate that a housing market exists on the north east of the island that includes East Cowes, Wootton Bridge, Fishbourne, Binstead and Ryde. Resident interviews confirmed this with many saying that future moves were likely to be within the North East part of the island rather than Wootton Bridge itself.

2.42 Stakeholders interviewed led consultants to consider that Gurnard’s role is part of a wider housing market area, specifically Cowes and the parish of Northwood, although Cowes provides the larger and more diverse supply of housing for sale and rent.

Defining Sub-Market Areas

2.43 Drawing the analysis together, the evidence indicates that the SHMA 2007 housing sub-markets are broadly reflective of the current market, based on Parish boundaries apart from a separation in the markets of Cowes and East Cowes, Ryde and Seaview (which is forms part of the East Wight sub market). This is based on the following principles:

 The urban areas of Newport and Ryde form their own sub markets  A sub market is formed comprising of Cowes, Northwood and Gurnard whilst respecting the individual nature of these settlements,  A Wootton and Fishbourne sub market exists as those who are unable to have their housing need or demand met in Fishbourne will normally search within the wider area of Wootton Bridge as well.  The Bay operates as one sub market based on the type of accommodation and household composition that is distinctive from the surrounding areas  There is an East Wight sub market that comprises of the Parishes of Bembridge, Nettlestone and Seaview, and St.Helens that is distinctive from the areas of Ryde and the Bay.  A sub market is formed of East Cowes and Whippingham reflecting the location of these two Parishes that is separate from Wootton or Cowes.  Ventnor is a distinctive sub market that is separate from the surrounding rural areas  There are two broad rural sub markets forming Rural East Wight and Rural West Wight reflecting that those looking not to live within urban centres will look within these wider areas in their area of search, based on their local connections to the area.  A sub market exists of West Wight reflecting the urban nature of Yarmouth, Freshwater and Totland.

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2.44 Figure 16 maps the geography of housing sub-markets on the Island. Figure

Figure 16: 2013 Housing Sub-Markets

2.45 Table 2 identifies which parishes fall within each of the sub-markets. It also shows the ‘best fit’ of ward boundaries to the sub-markets. Ward boundaries have been used for subsequent modelling in this report (as data is available at this level).

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Table 2: Parishes and ‘Best Fit’ Wards within each Sub-Market Parishes within the Sub- Sub-Market Best-Fit of Wards to Sub-Market Market Cowes Cowes, Northwood, Gurnard Cowes North, Cowes Medina, Cowes West & Gurnard, Cowes South & Northwood East Cowes East Cowes, Whippingham East Cowes, Whippingham & Osborne Wooton Wooton Bridge, Fishbourne Wootton Bridge, Binstead & Fishbourne Ryde Ryde Ryde North West, Ryde North East, Ryde West, Ryde South, Ryde East East Wight Bembridge, Seaview & Nettlestone & Seaview, Brading, St Helens & Nettlestone, St Helens Bembridge Rural East Wight Wroxall, Godshill, Rookley, Havenstreet, Ashey & Haylands, Arrreton & Arreton, Havenstreet & Ashley, Newchurch, Godshill & Wroxall Newchurch, Brading The Bay Sandown, Lake, Shanklin Sandown North, Sandown South, Lake North, Lake South, Shanklin Central, Shanklin South Ventnor Ventnor Ventnor West, Ventnor East Rural West Wight Niton & Whitwell, Chale, West Wight, Central Wight, Chale, Niton and Chillerton & Gatcombe, Whitwell Calbourne, Brighstone, Shalfleet, Shorwell Newport Newport Parkhurst, Carisbrooke, Newport North, Newport Central, Newport West, Newport East, Newport South West Wight Yarmouth, Freshwater, Totland Freshwater North, Freshwater South, Totland

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3 POLICY CONTEXT

3.1 This section provides a review of relevant strategic housing and planning policies, from a national to local level.

National Planning Policies

3.2 The Coalition Government reformed the policy framework for planning for housing provision, revoking regional spatial strategies and returning responsibilities for determining policies for housing provision to local authorities. The South East Regional Plan 18 has been revoked. The primary legislation to support this is the 2011 Localism Act 19 which now includes a ‘duty to cooperate’ on local authorities.

3.3 The duty applies to the preparation of development plan and other local development documents, and to activities which can ‘reasonably be considered to prepare the way’ for these activities or support them (such as the preparation of evidence base studies such as this). Authorities are required by Section 110(2) of the Localism Act to “engage constructively, actively and on an on- going basis” with the other authorities identified in undertaking these tasks. The duty to cooperate is a legal test to which development plans must comply. If this is not passed, then a planning inspector may indicate that a plan should be withdrawn.

3.4 National policies for plan-making are set out within the National Planning Policy Framework20.This sets out key policies against which development plans will be assessed at examination and to which they must comply.

National Planning Policy Framework (NPPF)

3.5 The National Planning Policy Framework (NPPF) was published in March 2012. Compliance of existing Local Development Documents becomes a key issue from April 2013 onwards.

3.6 The Framework sets a ‘presumption in favour of sustainable development’ whereby Local Plans should meet objectively assessed development needs, with sufficient flexibility to respond to rapid change, unless the adverse impacts of doing so would significantly or demonstrably outweigh the benefits or policies within the Framework indicate that development should be restricted. Green Belt, AONB and flood risk are recognised as nationally-significant constraints however the Framework does allow review of Green Belt boundaries through the development of Local Plans.

18 http://www.legislation.gov.uk/uksi/2013/427/contents/made 19 http://www.legislation.gov.uk/ukpga/2011/20/contents/enacted 20 CLG (March 2012) National Planning Policy Framework

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3.7 The core evidence for housing requirements is intended to be a Strategic Housing Market Assessment (SHMA) for the housing market area. The NPPF paragraph 159 outlines that this should identify the scale and mix of housing and the range of tenures which the local population is likely to need over the plan period which:

 Meets household and population projections, taking account of migration and demographic change;  Addresses the need for all types of housing, including affordable housing and the needs of different groups in the community; and  Caters or housing demand and the scale of housing supply necessary to meet this demand.

3.8 This is reaffirmed in the NPPF in paragraph 50. The SHMA is intended to be prepared for the housing market area, and include work and dialogue with neighbouring authorities where the HMA crosses administrative boundaries.

3.9 NPPF paragraph 181 sets out that LPAs will be expected to demonstrate evidence of having effectively cooperated to plan for issues with cross-boundary impacts when their Local Plans are submitted for examining. Effective dialogue with other authorities would be required under the ‘duty to co-operate’ if the evidence suggested that the Council was not able to meet its objectively- assessed requirement for housing on the Island.

3.10 This highlights the importance of collaborative working and engaging constructively with neighbouring authorities, as required by Section 33A of the 2004 Planning and Compulsory Purchase Act, and ensuring that there is a robust audit trail showing joint working to meet the requirements of paragraph 181 of the NPPF.

3.11 Paragraph 158 of the NPPF also emphasises the alignment of the housing and economic evidence base and policy. Paragraph 17 in the NPPF reaffirms this, and outlines that plans should also take account of market signals, such as land prices and housing affordability. However it also makes clear that plans must be deliverable.

3.12 The preparation of a SHMA for the housing market area is intended to be the primary means of determining policies for future housing provision.

3.13 The SHMA is intended to be brought together with evidence of land availability, from a Strategic Housing Land Availability Assessment. To increase housing supply, the NPPF proposes that Local Authorities should be required to maintain a 5 year supply of specific deliverable sites, and to include an allowance of 5% to ensure choice and competition in the market for land (unless there is a persistent track record of under-delivery).

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3.14 In regard to housing mix, the NPPF sets out that authorities should plan for a mix of housing based on current and future demographic trends, market trends and the needs of different groups in the community. Planning authorities should identify the size, type, tenure and range of housing that is required in particular locations reflecting local demand. Where a need for affordable housing is identified, authorities should set policies for meeting this need on site. National thresholds for affordable housing provision are removed as are national brownfield development targets.

3.15 In setting affordable housing targets, the NPPF states that to ensure a plan is deliverable, the sites and the scale of development identified in the plan should not be subject to a scale of obligations and policy burdens such that their ability to be developed is threatened and should support development throughout the economic cycle. The costs of requirements likely to be applied to development, including affordable housing requirements, contributions to infrastructure and other policies in the Plan, should not compromise the viability of development schemes. To address this, affordable housing policies would need to be considered alongside other factors including infrastructure contributions – a ‘whole plan’ approach to viability. Where possible the NPPF encourages Local Authorities to work up Community Infrastructure Levy (CIL) charges alongside the Local Plan.

Changes to National Housing Policies

Housing Strategy for England

3.16 In November 2011 the Government published Laying the Foundations: A Housing Strategy for England21 (HM Government, Nov 2011). This outlines the Government’s ambition to get stimulate house-building, not least to support economic recovery. It identifies a number of initiatives to support this, including:

 New-build Indemnity Scheme – providing Government-backed 95% mortgages for new-build properties;

 Growing Places Fund – providing funding for infrastructure which unblocks housing and economic growth;

 Initiatives to Kick-Start Stalled Developments – including proposals to allow reconsideration of planning obligations; a ‘Get Britain Building’ Investment Fund to provide development finance;

 ‘build now, pay later’ deals with public sector land; and

 Custom Homes Programme – with short-term project finance support for individuals looking to build their own homes.

21 https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/7532/2033676.pdf

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3.17 The Strategy includes initiatives to support growth and investment in the Private Rented Sector, including new ‘build-to-let’ models and a review of barriers to investment. It also indicates that the Government is looking at supporting greater innovation and competition between social landlords, including encourage new private entrants to the sector, and potential new approaches to funding in the medium-term.

3.18 The Strategy also included proposals for Reinvigorating the Right-to-Buy by raising the discounts available to tenants, but with a commitment to build a new ‘replacement’ home for affordable rent for every home lost. It also identified a funding steam to support local authorities in bringing empty homes back into use.

3.19 The Great Britain Building Fund and Growing Places Fund provide funding to unblock stalled schemes. The Government is also advising local authorities to renegotiate existing S106 agreements where these provide a hindrance to development, including allowing developers to appeal decision for a three year period to April 2016.

3.20 The Reinvigorating Right-to-Buy scheme increases the discount cap to £75,000; and makes provision that receipts from sales will be retained by local authorities to deliver replacement provision.

3.21 Since the 2011 Housing Strategy the Government has introduced a number of additional measures to try to kick-start the housing market. Of particular relevance is the new “Help to Buy” scheme introduced in the 2013 Budget. This provides two schemes aimed at increase the supply of low- deposit mortgages and new housing:

 Help to Buy Equity Loan – a new-build only scheme which expands the existing FirstBuy scheme to provide an equity loan of up to 20% of the value of a home through an equity loan. The scheme will run until April 2016 and buyers will require only a 5% deposit;

 Help to Buy Mortgage Guarantee – a similar scheme where buyers will require a 5% deposit and the Government will provide guarantees underpinning the 95% mortgage from a commercial lender. This scheme is available for both new-build and existing homes.

3.22 Moving forward these schemes could have a real impact at stimulating effective market demand for homes (and there is some evidence of this already) as they target some of the key challenges which have restricted access to owner occupation - difficulties for households in securing mortgage finance and high loan-to-value ratios.

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Localism Act – Housing Reforms

3.23 The Localism Act 2011 has introduced a number of reforms affecting the management of social housing. These reforms are summarised below:

Allocations Policies

3.24 The Localism Act gives Councils greater flexibilities in deciding who qualifies to go onto housing waiting lists (through their allocations policies) and how they treat tenants who want rather than need to move. Local Authorities can thus revise their allocations policies, should they wish to do so, to prevent people with no ‘need’ for affordable housing from joining housing registers.

Tenancies

3.25 The Localism Act has introduced changes to social housing tenancies, giving both local councils and Registered Providers (RP’s) the flexibility to grant fixed term tenancies (as well as lifetime tenancies) should they decide to do so. New fixed term tenancies would continue to be at social rent levels and tenants would have the same rights as those with existing lifetime tenancies in terms of a right to repair or to buy/acquire. A minimum fixed-term tenancy in most cases would be for five years (with two year tenancies granted only in exceptional circumstances). Shorter tenancies are considered to be one way of making better use of the existing social housing stock in meeting housing need. Specific local policies are expected to be set out in local authority’s tenancy strategies.

3.26 The Government has also changed the rules on succession to make them consistent for all Council and RP tenants. The spouse or partner of a tenant who dies will have an automatic legal right to succeed, but will not have an automatic right to then pass on the property. This will not however affect joint tenancies or existing secure tenants.

Reform of Homelessness Legislation

3.27 Councils will be able to bring the statutory homelessness duty to an end with an offer of suitable private rented housing. People’s right to refuse private rented accommodation will be withdrawn. This could potentially assist in the use of private sector housing stock in meeting affordable housing needs. Specific local policies are expected to be set out in local authority’s tenancy strategies.

3.28 The Government has also recently introduced a new nationwide home swap scheme to support mobility in the social sector. In terms of social housing finance, the Localism Act also introduces ‘self-financing’ which allows Councils to keep money from rents to spend on upkeep, investment and management of their housing stock. It has also made changes to the regulation of the Social Housing Sector.

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Welfare Reforms

3.29 The Welfare Reform Act received Royal Assent in March 2012. This introduces the following:

 Household Benefit Cap;  Planned introduction of Universal Credit (combining current existing benefits);  Linking Local Housing Allowance (LHMA) rates to CPI; and  Size Criteria for Calculating Housing Benefit in the Social Rented Sector.

Household Benefit Cap

3.30 The Welfare Reform Act introduces restrictions on how much Housing Benefit working-age households in social rented properties can claim from April 2013, based on the size of the household. Housing Benefit has been previously based on the size of the property rather than the household. This change will particularly impact on working-age households who are under- occupying homes. The Government estimates that the change of policy will impact on 670,000 households nationally – 32% of all working-age households in receipt of Housing Benefit. The average cost to affected households will be a reduction in Housing Benefit of £13 per week in 2013/14. The policy change is focused on reducing the Government’s benefit bill, increasing mobility in the social rented sector and making better use of the existing social housing stock.

Shift towards Universal Credit

3.31 Universal Credit, which brings together existing benefits into a single payment, is due to be phased in from October 2013. A movement towards universal credit to provide one streamlined payment is likely to end the payments of housing benefit directly to landlords in some instances. Coupled with the caps on growth in LHA levels, this may over time make tenants on benefits less attractive to landlords. It could result in some moderating of growth in benefit claimants in the private rented sector, although this will depend on overall dynamics within the sector.

Changes to Local Housing Allowance

3.32 Low income households living in the Private Rented Sector are able to claim Local Housing Allowance (LHA) to assist in meeting their housing costs. LHA is determined in relation to rents in the Broad Rental Market Area (BRMA) in which a property lies.

3.33 In April 2011 the Government changed how LHA is calculated, shifting this from median rents in the BMRA to the 30th percentile. It has also introduced caps on LHA payments: £250 a week for a 1- bed property or shared accommodation, £290 a week for a 2-bed property, £340 a week for a 3- bed property and £400 a week for properties with 4 or more bedrooms.

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3.34 The Welfare Reform Act also indicates that increases in LHA rates from 2013 will be restricted to growth in inflation as measured by the Consumer Price Index (CPI). Rates will also be set annually rather than monthly. This can be expected to exert a downward pressure on rents, particularly in areas where LHA claimants form a significant proportion of the private rented sector market, and may encourage some LHA claimants to move to cheaper areas.

Size Criteria within the Social Rented Sector

3.35 The Welfare Reform Act introduces restrictions on how much Housing Benefit working-age households in social rented properties can claim from April 2013, based on the size of the household. Housing Benefit was previously based on the size of the property rather than the household. This change will particularly impact on working-age households who are under- occupying homes. The applicable maximum Housing Benefit which households can claim will be reduced by national proportions based on the number of rooms households have which they don’t require.

3.36 The Government estimates that the change of policy will impact on 670,000 households nationally – 32% of all working-age households in receipt of Housing Benefit. The average cost to affected households will be a reduction in Housing Benefit of £13 per week in 2013/14. The change is expected to have a greater impact in areas with less social rented accommodation and will particularly affect older, working-age households.

Local Housing and Planning Policies on the Isle of Wight

3.37 Policy DM3 of the Island Plan Core Strategy22 gives specific guidance for planning applications in relation to the delivery of a balanced mix of housing supply. It confirms that it is important that a wide choice of housing types and sizes are delivered during the plan period to meet community needs.

3.38 Policy DM3 confirms that the Council will ensure that housing being proposed provides a sufficient mix of dwellings and sizes and states that the following sources will be used to inform what should be delivered, based upon location:

 SHMA  Housing Strategy  Housing Needs Surveys  Monitoring

22 http://www.iwight.com/Residents/Environment-Planning-and-Waste/Planning-Policy-new/Core-Strategy/About4

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3.39 For the purposes of Policy DM3 “specialist housing requirements” includes housing that meets the needs of older, disabled, low income and vulnerable persons.

3.40 Policy DM4 provides the specific guidance on affordable housing that will be used to consider planning applications. The Isle of Wight Council’s Housing Strategy 2007-2012 makes a clear aim to ensure that the needs of those on low incomes and vulnerable people (including those with mobility needs), as well as those wanting to gain a foot on the housing ladder, must be met.

3.41 Policy DM4 confirms that the Council will seek to deliver around 1,790 affordable homes over the plan period. Development proposals will be expected to:

 Provide 35% of the development as on-site affordable housing, based on developments of 15+ units in Key Regeneration Areas and 10+ units elsewhere.  Provide financial contributions towards affordable housing for developments of 1-14 units in Key Regeneration Areas and 1-9 units in Smaller Regeneration Areas and rural areas.  Deliver a target mix of 70% of affordable housing to be social/affordable rented and 30% for intermediate tenures.  Demonstrate how the proposals benefit the community.

3.42 Policy DM5 states that by 2025, it is calculated that the proportion of people over 65 on the Island will grow by 5% from its 2009 levels to 28%. With this anticipated population profile, it is critical to ensure that there are appropriate facilities and housing choices to meet the likely future need. It is important to ensure that there is housing choice located in close proximity to public transport, amenities and services, in addition to providing a range of services to help older people to stay in their own home.

3.43 Policy DM5 confirms that the Council will support development proposals that contribute to the delivery of a target of 2,050 units of accommodation suitable for older persons over the plan period. Development proposals will be expected to:

 Support the development of specialist accommodation for older people in sustainable locations where a need is demonstrated.  Enable delivery of a combination of new schemes and the remodelling of older specialist housing which does not meet the Decent Homes Standard or Lifetime Homes Standard.  Deliver between 20% and 25% of the site as accommodation suitable for older people, when it is a major housing development. This could be provided through open market housing that has been designed to take into account the needs of older people or specialist housing for older people.  Ensure that accommodation suitable for older people is of a high quality specification and designed to meet the Design Criteria of Lifetime Homes Standards.  Protect existing specialist accommodation, unless it can be demonstrated that there is insufficient demand and/or need, or alterations to and the loss of would result in an overall improvement of provision that will meet the needs of the whole community.

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3.44 Policy DM6 (Gypsies, Travellers and Travelling Showpeople) explains the approach that the Council will take with regard to the provision of housing for Gypsies, Travellers and Travelling Showpeople, which is in line with the general approach to housing set out in SP2 (Housing).

3.45 Accommodation needs studies, undertaken at the regional level, demonstrate that there is a clear need for the provision of sites on the Island. The study undertaken by David Couttie Associates in 2006, to evidence regional requirements, identified a need for 24 pitches (including one transit site) to be provided on the Island between 2006 and 2011. Following work at the regional level to ascertain housing needs to 2016, this figure was increased to 27 (including one transit site) to take account of potential new family formation.

3.46 Taking into account the Core Strategy period of 2011 to 2027, and that there has been no delivery of sites to date (since the 2006 study), the Council considers that the provision of 27 pitches would be required to be delivered between 2011 and 2021 to meet the identified need. The Council will, through the Housing Strategy, monitor the required need over the Core Strategy period and identify any further need between 2021 and 2027 to ensure that additional land can be allocated if required.

3.47 Policy DM6 confirms that The Council will meet the identified need for Gypsy, Traveller and Travelling Showpeople pitches by allocating sufficient sites within the Area Action Plans and Delivery and Management DPDs and supporting proposals that are:

 On appropriate land within or immediately adjacent to defined settlement boundaries.  Accessible to shops, schools and health facilities by public transport, on foot or by cycle.  Served, or be capable of being served, by adequate on-site services for mains water, power, drainage, sewage disposal and waste disposal facilities.

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4 STOCK AND SUPPLY TRENDS

4.1 This section reviews the housing stock and how this has been changing over the last decade. The Isle of Wight SHMA looks at housing requirements over the period to 2027 and beyond. Much of the housing stock likely to exist in 2027 already exists now; and it is thus important to understand the current ‘housing offer’ and how this has been changing, to consider what gaps in the offer new-build development might fill moving forward.

4.2 In this section, we profile the current housing offer, considering the profile of stock of different types, sizes and tenures of homes, how this has been changing, and how it varies across the island.

Tenure Profile

4.3 The 2001 Census indicated that there were just over 61,000 households on the Isle of Wight.

Table 3: Households (2011) Households Isle of Wight 61,085 South East 3,555,463 England and Wales 23,366,044 Source: Census, 2011

4.4 Across the Island in April 2012, 10.2% of homes were in public sector ownership; whilst 89.8% were in private ownership (either owner occupied or private rented).These figures relate to total dwellings, which includes homes occupied by households, along with vacant and second homes.

Table 4: Tenure Profile - Dwellings, 201223

Local Private Other public Private Total Authority Registered sector Sector Provider 0 6,960 10 61,060 68,030

Source: Isle of Wight Council, 2013

4.5 10.2% of the housing stock is in public sector ownership (predominantly by Registered Providers). This is below the Hampshire average of 14.3% and the England average of 17.8%.

4.6 A more detailed picture of the housing stock is available using 2011 Census data. Table 4 indicates that owner occupation is the dominant tenure across the Island and accommodates 70.1% of households. Owner- occupation is above the England average (63.3%).

23 CLG Table 100 https://www.gov.uk/government/statistical-data-sets/live-tables-on-dwelling-stock-including-vacants

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4.7 The proportion of private renting on the Island (17.4%) is higher than the national (16.8%). The level of social renting on the Island (10.7%) is lower than the South East (13.7%) and lower than the England average (17.7%).

Table 5: Tenure, Census 2011 Count % Owned; Owned Outright 25,091 41.1% Owned; Owned with a Mortgage or Loan 17,726 29.0% Shared Ownership (Part Owned and Part Rented) 362 0.6% Social Rented; Rented from Council (Local Authority) 598 1.0% Social Rented; Other 5,925 9.7% Private Rented; Private Landlord or Letting Agency 9,663 15.8% Private Rented; Other 976 1.6% Living Rent Free 744 1.2% All Households 61,085 100.0% Source: Census 2011(KS402EW) 24

4.8 Table 6 profiles changes in the number of households between 2001-11. It shows that over this period the number of households increased by 6.2% on the Island, compared to 8.2% growth across the South East and 7.9% nationally.

Table 6: Growth in Households (2001-2011) Households Households Change % Change 2001 2011 Isle of Wight 57,519 61,085 3,566 6.2% South East 3,287,489 3,555,463 267,974 8.2% England and Wales 21,660,475 23,366,044 1,705,569 7.9%

Source: Census 2011

4.9 Over the 2001-11 period the tenure profile of housing has also changed. Figure 17 shows that private renting has been the key growth sector within the housing market over this decade.

24 http://www.neighbourhood.statistics.gov.uk/dissemination/LeadTableView.do?a=7&b=6275138&c=isle+of+wight&d=13&e=7&g=640207 5&i=1001x1003x1004&m=0&r=1&s=1378722284882&enc=1&dsFamilyId=2482 Census 2011

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Figure 17: Change in Tenure Profile Core IOW, 2001 – 2011

Source: 2001 and 2011 Census (2001 Table KS18, and 2011 Table KS402EW)

House Types

4.10 Detached housing accounts for the largest proportion of housing stock across the Isle of Wight (34.8%) compared to 22.8% in PUSH and 28.2% across the South East Region.

4.11 Terraced housing accounted for the smallest proportion of the housing stock across the island (15.4%) compared with 27.1% in PUSH, 22.5% regionally and 24.5 nationally).

4.12 Flats, maisonettes and apartments account for 19.7% of the housing stock across the island compared with PUSH 24.1%, 20.3% regionally and 21.2% nationally.

Table 7: Accommodation Type - Households (QS402EW), 201125 Count % Detached 21,269 34.8% Semi-Detached 17,848 29.2% Terraced (Including End-Terrace) 9,393 15.4% Flat, Maisonette or Apartment; 12,036 19.7% All Households 61,085 100%

25 http://www.neighbourhood.statistics.gov.uk/dissemination/LeadTableView.do?a=3&b=6275138&c=isle+of+wight&d=13&e=61&g=6402075&i=10 01x1003x1032x1004&m=0&r=1&s=1378727945024&enc=1&dsFamilyId=2570

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House Sizes

4.13 The profiles of housing of different sizes across the island are similar to national patterns, but with a slightly higher proportion of 2 and 3 bedroom properties.

Table 8: Number of Bedrooms (QS411EW) Census 201126 Isle of Wight South East England Count % Count % Count % No Bedrooms 111 0.2% 8,531 0.2% 54,938 0.3% 1 Bedroom 6,309 10.3% 413,761 11.6% 2,593,893 11.8% 2 Bedrooms 20,293 33.2% 932,994 26.2% 6,145,083 27.9% 3 Bedrooms 24,525 40.2% 1,383,662 38.9% 9,088,213 41.2% 4 Bedrooms 7,420 12.2% 603,887 17.0% 3,166,531 14.4% 5 or More Bedrooms 2,427 4.0% 212,628 6.0% 1,014,710 4.6% All Household Spaces 61,085 100.0% 3,555,463 100.0% 22,063,368 100.0%

Source: 2011 Census

4.14 The correlation between smaller house sizes and Council Tax data is shown in the following table which shows that in the Urban Sub Markets house sizes are more generally based around the 1, 2 and 3 bedroom accommodation reflecting better access for lower income households to the market.

Council Tax Band

4.15 Across the Island, 40.0% of dwellings are Council Tax Bands A and B which is lower than the England average (44.4%) but much higher than the South East average (25.5%). This is partly influenced by below average housing costs on the Island relative to other parts of the South East.

26 http://www.neighbourhood.statistics.gov.uk/dissemination/LeadTableView.do?a=3&b=6275138&c=isle+of+wight&d=13&e=61&g=6402075&i=10 01x1003x1032x1004&m=0&r=1&s=1378727945040&enc=1&dsFamilyId=2556

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Table 9: Key Figures for Housing, Census 2011 27 Council Tax Band % of Dwellings Band A 14.4% Band B 25.5% Band C 24.2% Band D 19.0% Band E 10.1% Band F 4.5% Band G 2.1% Band H 0.2% Total 100.0% Source: CLG / Neighbourhood Statistics

Changes in the Use of Housing

4.16 Studying levels of overcrowding in the housing stock is an important part of the SHMA. This is strongly recognised in the Draft Planning Practice Guidance28 which notes that ‘if overcrowding is an issue, building one new larger property could help to resolve the needs of several households as households “move up” through the system into larger properties’.

4.17 Data about overcrowding is available from the 2011 Census based on the ‘bedroom standard’. This is defined by the difference between the number of bedrooms needed to avoid undesirable sharing (given the number, ages and relationships of the household members) and the number of bedrooms available to the household. A household is defined as overcrowded if there are fewer bedrooms available than required by the bedroom standard.

Table 10: Overcrowding, 2011 – Bedroom Standard Isle of Wight South East England

2 or more rooms than need 21,286 34.8% 37.1% 34.3% 1 or more rooms than need 23,016 37.7% 33.6% 34.4% Equal rooms to need 15,229 24.9% 25.7% 26.7% 1 or more less rooms than need 1,426 2.3% 3.2% 3.9% 2 or less rooms than need 128 0.2% 0.4% 0.7% % Overcrowding 2.5% 3.6% 4.6% Total Households 61,085 100% 100% 100%

Source: 2011 Census

4.18 The island area has a lower level of overcrowding (2.5%) than the South East (3.6%) and the England average (4.6%).

27 http://www.neighbourhood.statistics.gov.uk/dissemination/LeadKeyFigures.do?a=3&b=6275138&c=isle+of+wight&d=13&e=7&g=6402075&i=10 01x1003x1004&m=0&r=1&s=1378730284039&enc=1

28 CLG (Aug 2013) Draft Planning Practice Guidance – Assessment of Housing and Economic Development Needs

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4.19 Urban areas with smaller stock are an indication of higher than average over-crowding with the sub markets of Ryde (3.57%), Newport (3.07%), East Cowes (2.98%) and the Bay (2.97%) experiencing the highest levels.

4.20 Census 2011 data also computes a measure of overcrowding using occupancy ratings. The occupancy rating assumes that all households should have one common room and there should be one additional room for each household member. Therefore a five person household living in a five room dwelling would be considered as overcrowded. Whilst using the bedroom standard is preferable it is useful to consider occupancy ratings to allow us to compare changes over time – earlier Census data did not collect data about the number of bedrooms in a home.

4.21 The analysis suggests that the intensity of occupation of housing has increased between 2001-11, with the number of households with more household members than bedrooms increasing by 762 households between 2001-11 – a growth of 1 percentage point (pp). This is a more modest growth than at the regional or national level.

Table 11: Changes in Overcrowding using Occupancy Rating, 2001-11 Isle of Wight South East England

Households % % % Overcrowding: Occupancy Rating, 2001 2,774 4.8% 5.9% 7.1% Overcrowding: Occupancy Rating, 2011 3,536 5.8% 7.5% 8.7% Change 762 1pp 1.6pp 1.6pp

Source: 2001 Census, 2011 Census

Vacant Stock

4.22 Information29 on vacant dwellings by local authority level indicates that at 2012 there were 2534 vacant dwellings (which is 3.7% of the housing stock). However 67% of this total relates to short term transactional empty dwellings and long term vacancy rate30 is 1.2% (837 dwellings).

4.23 The Council accurately monitors long term empty dwellings and has a full time empty property officer who works with owners in order to maximise the opportunities for re-use of buildings. This monitoring shows the locations of long term empty dwellings:

29 CLG Live Table 615 - https://www.gov.uk/government/statistical-data-sets/live-tables-on-dwelling-stock-including-vacants 30 Dwellings which have remained empty for more than six months

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Figure 18: Location of Empty Properties on the Island, Sept 2013

Second Homes

4.24 The Census 201131 recorded that there were 6,492 people who had a second address on the Isle of Wight. The represents 4.5% of the population (including the usual resident population and those with a second address) compared to 3.3% across the South East region and 2.7% across England and Wales.

Drawing the Analysis Together

4.25 Drawing the above analysis together, we can draw the following conclusions:

 The housing stock on the Island is focused towards two- and three-bed properties.  There are a high level of second homes on the Island. This is a relevant factor in projections in relating changes in household numbers to growth in the housing stock;  The tenure profile of the Island demonstrates a focus towards owner occupation. The social rented sector is modest in size, accommodating 10.7% of households in 2011. Over the 2001-11 decade, the number of households resident in the private rented sector has grown significantly (from 13.0%-17.4% of all households) as has been the case across the region and nationally.

31 Second Address, 2011

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5 HOUSING MARKET DYNAMICS AND MARKET SIGNALS

5.1 We have sought to provide an analysis in this section of housing market dynamics and market signals on the Isle of Wight. This includes a review of macro-economic dynamics and drivers as well as analysis of micro and local level house price, demand and rental trends for the Island. This is supplemented by qualitative evidence and findings from consultation with estate and letting agents active across the Island.

Overview of the UK Housing Market and Economy

Conceptual Framework

5.2 It is important to understand that the housing market is influenced by macro-economic factors, as well as the housing market conditions at a regional and local level. There are a number of key influences on the demand for housing, which are set out in the diagram below:

Figure 19: Understanding Future Housing Demand

ExistingStock & Market

Accessibility to Quality of Employment Place Centres

Demand Infuences

Demographic Employment Changes and Earnings

Access to Finance

Source: GL Hearn

5.3 At the macro-level, the market is particularly influenced by interest rates and mortgage availability, as well as market sentiment (which is influenced by economic performance and prospects at the macro-level). In the recent recessionary period, these macro conditions have been particularly prominent in driving the housing market.

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5.4 The market is also influenced by the economy at both regional and local levels, recognising that economic employment trends will influence migration patterns (as people move to and from areas to access jobs) and that the nature of employment growth and labour demand will influence changes in earnings and wealth (which influences affordability).

5.5 The demand for housing over the longer-term is particularly influenced by population and economic trends: changes in the size and structure of the population directly influence housing need and demand, and the nature of demand for different housing products.

5.6 There are then a number of factors which play out at a more local level, within a functional housing market and influence demand in different locations. The importance of these local factors is perhaps more pronounced in stable or healthy economic times, when mortgage availability and market liquidity are far less of a constraint on activity. These include:

 quality of place and neighbourhood character;  school performance and the catchments of good schools;  the accessibility of areas including to employment centres (with transport links being an important component of this); and  the existing housing market and local market conditions.

5.7 These factors influence the demand profile and pricing within the market. At a local level, this often means that the housing market (in terms of the profile of buyers) tends to be influenced and consequently reinforce to some degree the existing stock profile. However, regenerative investment or delivery of new transport infrastructure can influence the profile of housing demand in a location, by affecting its attractiveness to different households.

5.8 Local housing markets or sub-markets are also influenced by dynamics in surrounding areas, in regard to the relative balance between supply and demand in different markets; and the relative pricing of housing within them. Understanding relative pricing and price trends is thus important.

Understanding the Macro-Level Dynamics

5.9 Macro-economic factors such as the performance of the UK economy and bank lending conditions have been the primary driver of housing markets nationally over recent years. Since late 2010, we have seen negative trends in consumer spending and investment, with growth in the economy (at the macro-level) driven by exports and government spending. Coupled with this, inflation has been running above long-term trends and Government targets.

5.10 As a result, the UK has seen both deep recession and weak recovery. As the figure below indicates during the course of 2012 there was minimal growth in the UK economy. The economy has begun to pick up during the course of 2013.

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Figure 20: UK Economic Growth, 2007-2013

8.0

6.0

4.0

2.0

2001Q1 2006Q3 2009Q1 2002Q1 2002Q3 2003Q1 2003Q3 2004Q1 2004Q3 2005Q1 2005Q3 2006Q1 2007Q1 2007Q3 2008Q1 2008Q3 2009Q3 2010Q1 2010Q3 2011Q1 2011Q3 2012Q1 2012Q3 2013Q1 0.0 2001Q3

-2.0 Percentage Percentage change

-4.0

-6.0

Change on previous quarter (%) Change on corresponding quarter previous year (%)

Source: ONS

5.11 Over the last few years we have seen historically low levels of market activity (sales) and housebuilding. This has been influenced by low mortgage lending and buyer confidence.

5.12 Key issues affecting the ability of households and investors to secure mortgage finance are:

 Savings and Capital: the ability to raise a deposit;  Earnings and Interest Rates: affecting the ability to afford repayments;  Lending Criteria: key criteria which have to be met to secure finance.

5.13 One of the key triggers to the recent economic difficulties on an international level was the ‘credit crunch.’ The downturn in the world economy was led to a large extent by the sub-prime lending crisis in the United States: this crisis has generated a fundamental shift in not only interbank lending but more significantly, attitudes towards customer lending (including home purchasers, landlords and developers).

5.14 From the onset of the economic downturn, banks sought to increase the inter-bank lending rate (LIBOR) and sought to adjust their exposure to risk by adopting much more cautious lending practices. This sharply reduced liquidity in the financial markets and credit available and in tightening lending criteria for current and prospective homeowners. This tightening of lending criteria increased ‘barriers’ to entry for marginal mortgage applicants by reducing loan to value ratios (LTVs), increasing costs associated with obtaining mortgages and reducing the income multiples accepted.

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5.15 The tight lending criteria initiated by the credit crunch have continued to have an impact on mortgage lending over the last four years, with households’ ability to obtain mortgage finance functioning as a notable constraint on effective demand for market homes. As the figure below demonstrates, there is virtually no evident recovery in lending since 2010; with trends flat during the past few years. There are however signs that mortgage lending is picking up in 2013, particularly owing to Government-backed schemes.

Figure 21: Trends in Gross Mortgage Lending

400,000

350,000

300,000

250,000

200,000

150,000

100,000 Gross Mortgage GrossMortgage Lending (£m) 50,000

0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013e

Source: Council for Mortgage Lenders 2012

5.16 Combined the Funding for Lending Scheme and Help-to-Buy have had a notable impact in stimulating the housing market during the course of 2013. Figure 17 shows the trends in mortgage approvals over the last two years. It is notable that there has been an upturn in both house purchase activity and re-mortgaging over the last year; albeit that levels of approvals remain notably below pre-2008 levels.

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Figure 22: Trends in Mortgage Approvals by Type, UK 2011-2013

120.0

100.0

80.0

60.0 Other

40.0 Remortgaging House purchase 20.0

0.0

Apr 2012 Apr 2012 Jun Aug2012 2012 Oct Aug 2011 Aug 2011 Oct 2011 Dec 2012 Feb 2012 Dec 2013 Feb 2013 Apr 2013 Jun 2013 Aug

Source: Bank of England

5.17 The relatively strong upward trend in lending activity coupled with growth in house prices in some areas has led to some commentators to question whether we are heading for another housing market bubble32. To counter this potential in November 2013 the Bank of England announced that the Funding for Lending Scheme would be reprioritised on lending to businesses (effective from January 2013).

5.18 Average loan-to-value ratios fell sharply post-2008 and currently stand at 80%. There has however been a gradual improvement in the proportion of First-time Buyers (FTBs) with a deposit of 10% or less (albeit that for these loans the interest rates charged are often punitive), with 25% of FTBs putting down a deposit of 10% or less in early 2013.

5.19 For those with a sufficient deposit, housing is now actually relatively affordable given the reductions in the value of homes since the peak of the market in 2007 and low interest rates by historic standards. The figure below demonstrates the trend in mortgage interest rates over the past 15 years.

32 Meaning growth in house prices which is unsustainable and followed by a correction in which prices fall

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Figure 23: Base Interest Rates

10 9

8

7 6 5 4

3 Interest Rate (%) 2 1

0

01-Jan-07 01-Jan-97 01-Jan-99 01-Jan-01 01-Jan-03 01-Jan-05 01-Jan-09 01-Jan-11 01-Jan-13

01-Sep-01 01-Sep-09 01-Sep-97 01-Sep-99 01-Sep-03 01-Sep-05 01-Sep-07 01-Sep-11 01-Sep-13

01-May-04 01-May-98 01-May-00 01-May-02 01-May-06 01-May-08 01-May-10 01-May-12

Tracker Mortgage Variable Rate Tracker

Source: Bank of England Statistics 2013

5.20 Market sales are also influence by investment activity - that is properties bought to be rented privately. The buy-to-let sector continues to grow, with the Council for Mortgage Lenders indicating that by the end of March 2013 buy-to-let lending accounted for 13.4% of total outstanding mortgage lending in the UK. This was up from 13% the previous quarter and 12.9% at the end of the first quarter of 2012 - the increase in buy-to-let lending is partly related by improved access to finance. With growth in rents over the last few years and lower capital costs for house purchases, housing also represents an improved investment proposition. There is evidently occupier demand from households looking to rent homes from a combination of demographic factors, limited recent new- build development and households’ ability to afford to buy a home.

Demand Indicators and Market Signals on the Isle of Wight

House Price Trends

5.21 As recognised in the draft National Planning Practice Guidance, long term changes in house prices can be an indicator of the balance between the demand for, and supply of, housing in a particular area. Figure 24 profiles median house prices on the Island 1998 – 2007 (the pre-recession decade).

5.22 House price growth across the Isle of Wight was greater than the South East. Between Q1 1998 and Q4 2007, the median house price in the South East as a whole increased by an average of 188%. During this period the Isle of Wight experienced around 237% growth albeit from a lower

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base. As the chart illustrates between 2002 and the end of 2007 median house price and growth on the Island closely matched the national trends.

5.23 Overall, the pre-recession price growth points towards an imbalance between growth in housing supply and demand between 2002-5.

Figure 24: Median House Price Trends, 1998 – 2007

Source: HM Land Registry / CLG. Note: Data only available at LA level

5.24 National and regional house price dynamics since 2007 have been vastly different as a result of the wider economic situation. As the chart below demonstrates, house prices have been broadly flat over the past 5 years and, if inflation was stripped out, would likely show nil or even negative growth across many areas. Even without inflation the Isle of Wight experienced a small decline. This indicates a market characterised by higher supply than demand.

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Figure 25: Median House Price Trends, 2007-2012 (Q3)

Source: HM Land Registry. Note: Data only available at LA level

5.25 We can use the Land Registry’s House Price Index to track more recent trends. This shows that house prices have on average remained largely static since 2011. In overall terms the average price on the Island at £148,000 in October 2013. This compared to a peak of £188,000 at the peak of the market in January 2008. House prices thus remain 21% below their peak values.

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Figure 26: Seasonally Adjusted Average House Prices, Isle of Wight

£190,000

£180,000

£170,000

£160,000

£150,000 Average Average House Price

£140,000

£130,000

Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jul-12

Oct-07 Oct-11 Apr-07 Apr-08 Oct-08 Apr-09 Oct-09 Apr-10 Oct-10 Apr-11 Apr-12 Oct-12

Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

Source: HM Land Registry House Price Index

5.26 Table 12 provides a comparison of trends in house prices. Over the decade to the peak of the market in 2008, house prices on the Island increased by 221%. However prices compared to a decade ago (in October 2003) have risen by just 15% (£19,500) which is below average relative to Hampshire and the wider South East.

5.27 In particular house prices on the Island remain a notable 17% below their 2008 peak values, compared to 5% across Hampshire and the South East region. Over the year to October 2013 average prices on the Island remained static.

Table 12: Comparison of House Price Changes Isle of Wight Hampshire South East

Decade to Jan 08 £122,426 £137,697 £142,219 221% 157% 167% Decade Oct 03 - Oct 13 £19,519 £35,083 £40,048 15% 20% 23% Peak to Oct 13 -£29,820 -£12,015 -£11,213 -17% -5% -5% Year to Oct 13 -£460 £4,312 £8,264 0% 2% 4% Source: HM Land Registry House Price Index

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Current House Prices

5.28 Average house prices are influenced by the mix of homes sold and pricing differentials can be an important indicator of supply and demand dynamics for particular types of property within an area. Figure 27 profiles the average price for different types of property on the Island and for the South East over the past year.

5.29 Across all property types house prices on the Island are notably below the South East average. Detached house prices on the Island are particularly low in comparison to the region (- 60%). The smallest differential is in the price of flats and apartments, with the South East prices 38% higher than the Island.

Figure 27: Median House Prices by Type – Local Authorities (Dec 2012-Nov 2013)

Source: GLH Analysis of HMLR Data

Sales Trends

5.30 Sales volumes and sales rates are an important indicator of effective demand for market housing. We have benchmarked sales performance against long-term trends to assess relative demand. We use an approach of benchmarking sales performance against long-term trends to assess relative demand. Figure 28 benchmarks annual sales across the Island against wider geographies over the 1998-2011 periods. 2011 is the latest data currently available consistently. It uses an index where 1 is the average annual sales over the 1998-2007 decade (prior to the credit crunch).

5.31 Figure 28 shows that the credit crunch resulted in a substantial reduction in effective demand, with sales broadly halving across the Island, as well as across England and the South East. Between

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2009-11 there was only a very modest recovery in sales across both the Island and the country as a whole.

5.32 Analysis of the data indicates that in 2011, the combined number of sales on the Island were 45% down on the pre-2008 annual average, consistent with the corresponding figure for England as a whole (45%).

Figure 28: Indexed Sales Trends – 1998-2011

Source: HM Land Registry

5.33 Using more recent Land Registry data, we can see that transactions on the Isle of Wight did not increase in 2012. Transactions in the first 11 month in 2013 suggests that whilst sales volumes have improved, the upturn in sales during the course of 2013 on the Island was more modest than across Hampshire and the South East.

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Figure 29: Indexed Sales Trends, 2006-13

1.40

1.20

2007=1) - 1.00

0.80

0.60 Isle of Wight Hampshire 0.40 South East 0.20

Index (Average Index (Average 1998 Sales 0.00

01/05/2012 01/08/2013 01/02/2006 01/07/2006 01/12/2006 01/05/2007 01/10/2007 01/03/2008 01/08/2008 01/01/2009 01/06/2009 01/11/2009 01/04/2010 01/09/2010 01/02/2011 01/07/2011 01/12/2011 01/10/2012 01/03/2013

Source: HM Land Registry House Price Index

5.34 The proportion of detached sales on the Island is significantly higher than the regional equivalent, suggesting a strong market for, and availability of, such properties in this area. The proportion of terraced sales represented 20% of all sales in the Isle of Wight significantly below the regional average 28%. However, the Island does have a low percentage of this type of stock in total (15%).

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Figure 30: Percentage of Sales by Type Dec 2012-Nov 2013

Source: GLH Analysis of HMLR Data

Rental Values

5.35 Analysis of trends in median monthly private rents indicates that there has been a small and incremental growth in rents on the Island over the past few years (5%). This is slightly lower than the growth in the South East where average monthly rents have increase by £50 (7%) over the past three years.

Figure 31: Median Monthly Rental Levels – 2011 - 2013

Source: VOA Private Rental Data

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5.36 For all rental property sizes, the Isle of Wight is substantially cheaper than its South East equivalent. There is a particularly large differential in 4 bedroom properties where the South East median rent is 64% more expensive. For most house sizes, the Island is also less expensive to rent in than the national average. Only room rental costs and 2-bedroom properties match or exceed the national equivalent.

Table 13: Monthly Median Rental Costs by Size (Dec 2013) £PCM 1 Bed 2 Bed 3 Bed 4 Bed Studio Room Isle of Wight 450 575 695 913 350 347 South East 595 750 895 1495 494 370 England 500 575 650 1100 485 330 Source: VOA, 2014

Market Affordability

5.37 The draft Planning Practice Guidance33 specifically identifies the affordability of market housing for sale as an important signal of market pressures. We have therefore considered lower quartile affordability ratios produced by CLG. These describe the ratio between lower quartile house prices and lower quartile earnings, to provide an indication of the cost of entry level housing relative to the typical earnings of younger households. As a general observation, we can see that across all areas the affordability of market housing has worsened quite markedly over the past 15 years across the country.

5.38 In broad terms, Figure 32 demonstrates that affordability issues (using this measure) are more acute on the Isle of Wight (7.8) than the national level of 6.6. Towards the top of the market in 2007- 8, affordability pressures on the Island were higher still (9.38); however, the recession has effected a significant improvement in affordability. Affordability of market housing is better than across other parts of the South East region.

5.39 In areas of relative affordability, issues of suppressed household formation are likely to be less prevalent across the market as a whole but may occur in pockets as a result of mismatches in particular property types.

33 CLG (Aug 2013) Draft Planning Practice Guidance – Assessment of Housing & Economic Development Needs

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Figure 32: Lower Quartile Affordability (price/income) – (1997 - 2012)

Source: DCLG Affordability Tables

5.40 The situation with respect to affordability improves at the median house price to earnings level. This broadly indicates that issues with affordability are particularly focussed on the lower end of the market.

Table 14: Comparison of Median and Lower Quartile Affordability, 2011-2012 Median Lower Quartile 2011 2012 2011 2012 IOW 6.94 7.11 7.39 7.84 South East 7.97 8.19 England 6.69 6.74 6.57 6.59

Source: DCLG Affordability Tables

Qualitative Evidence

5.41 A programme of stakeholder consultation has been designed into the methodology in accordance with the study brief. This has consisted of:

 Face to face interviews with estate and letting agents and new build sales staff;  Discussions with a selected number of wider stakeholders; and  Consultation with Council Officers.

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5.42 It should be borne in mind that the findings presented in this part of the report reflect the views of estate and letting agents consulted. These are subjective views, and represent anecdotal evidence at the time at which the discussions took place (December 2013).

5.43 A commentary detailing the feedback from the stakeholder consultation programme is included in Appendix A.

General Findings from Estate & Letting Agents

5.44 Geography, location, topography and communications have a fundamental role in shaping housing markets. They are the factors that lead to settlements being formed and developed.

5.45 Whilst its economy is diverse, the sheltered northern Solent coastline provides access to the mainland and leisure and tourism is an important part of the economy. There are many marinas on this section of the coast patronised by wealthy yacht enthusiasts. Cowes week attracts an international audience and this is just one example of the many major and minor festivals that draw visitors to the island. On the eastern coast there are seaside holiday resorts. Between Freshwater in the west, Ventnor in the east and Newport is a rural and coastal area with attractive villages and hamlets.

5.46 The Island housing market is different to the mainland in many important ways. Demand for housing is from both from local buyers and people moving to the Island. Some visitors are motivated to acquire second homes and others choose to retire here. Many of these people are either high earners or have large amounts of capital released from housing in the expensive housing markets of London and the South East. A proportion of the housing stock, particularly in the Bay area, is used as guest house accommodation for the holiday maker. This is in contrast to people that live and work on the island where employment levels and average incomes are below mainland averages and well below averages in London and the South East.

5.47 The consultation findings suggest that the Island’s housing market serves both local households and those moving to the Island and plays a role in the residential and holiday markets. A significant part of the market provides housing for older people. Incomers are mainly retired households, those seeking a second home and yachting enthusiasts. The proportion of homes owned as second homes can be high, presenting challenges to local businesses in winter.

5.48 Parts of the Island attract different household typology. The Freshwater area has a higher proportion of middle income retired incomers. The coastal settlements attract both retired households and high earning incoming households wanting second homes. Ryde and West Cowes attract economically active people who choose to commute to the mainland using the high speed ferries.

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5.49 Towns attract older people as access to necessary support services is easier than in villages and hamlets. This applies to local households, as well as households moving to the Island who then move from a village to a town. Some older people sell up and return to the mainland to enjoy the support of their families when becoming frail.

5.50 Some seaside towns have a large number of former dwellings in the holiday sector. Guest houses and small hotels operating in the budget end of the market have experienced weak demand and some are being returned to the residential sector. This is especially true in Ryde and Sandown. Vacant buildings and those undergoing conversion are having an adverse impact on the street scene in some areas. In Ryde, large numbers of houses have been converted in to flats, some of which are shared and are of poor quality. However Ryde is seen as a town of great potential, because of its location and easy access to the mainland.

5.51 The average income of households with local workers tends to be lower than that of those moving from the mainland because of the nature of the Island’s economy. This means that many indigenous households need affordable housing or lower priced market housing. This has contributed to the large growth in the private rented sector.

5.52 Agents report a critical shortage of good quality 3 bedroom family homes affordable to local households. Demand for these homes in the resale market has peaked due to households being unable to acquire them due to the credit crunch (low levels of supply and challenging mortgage conditions). In the rental market, supply is restricted, as families move less frequently than singles or couples without children. In some parts of the island market conditions do not generate optimum returns for landlords to acquire 3 bedroom homes.

5.53 Volume builders have been able to assist local households, mainly first and second time buyers through the Government’s Help-to-Buy scheme. However more expensive new build developments attract households to the Island for retirement or second home purposes. However there is doubt that interest from national volume builders can be sustained. Instead stakeholders suggest that regional builders are likely to deliver new market and affordable housing in the key regeneration areas on medium sized sites. There is concern that other than on these sites, house-building will be focused towards small sites that will not contribute to affordable housing supply.

5.54 Benefit reform has had a significant impact on the nature of demand across the social rented sector and parts of the private rented sector.

5.55 The quality of private rented sector housing has been challenged by downward pressure on rents and supply from the tourism sector in terms of holiday lets.

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Changes in the Use of Housing

5.56 Studying levels of overcrowding in the housing stock is an important part of the SHMA. This is strongly recognised in the Practice Guidance which notes that ‘if overcrowding is an issue, building one new larger property could help to resolve the needs of several households as households “move up” through the system into larger properties’. The draft Planning Practice Guidance identifies long term increases in overcrowding as a potential signal that housing supply might need to increase.

5.57 Data about overcrowding is available from the 2011 Census based on the ‘bedroom standard’34. This is defined by the difference between the number of bedrooms needed to avoid undesirable sharing (given the number, ages and relationships of the household members) and the number of bedrooms available to the household. A household is defined as overcrowded if there are fewer bedrooms available than required by the bedroom standard.

5.58 The Isle of Wight has slightly lower level of overcrowding in 2011 (2.5%) than the South East (3.6%) the England average (4.6%). Conversely, the Island has higher than average level of under occupied homes (72.5%) compared to both the South East and England average (68.7%).

Table 15: Overcrowding, 2011 % Overcrowded % Households Under-

Households Occupying Homes IOW 2.5% 72.5% South East 3.6% 70.7% England 4.6% 68.7% Source: 2011 Census

5.59 To identify trends, we have compared the room based occupancy measure from the 2001 and 2011 Census. From this, we can see that over the past decade, the number of overcrowded households has grown by more than 36% across the South East, slightly above the national level at 32%. The increase in overcrowding over the past decade has been lower on the Isle of Wight (27.5%).

34 The ‘bedroom standard’ is used as an indicator of occupation density. A standard number of bedrooms is calculated for each household in accordance with its age, sex, and marital status composition of the household and the relationship of the members to one another. A separate bedroom is allowed for each married or cohabiting couple, any other person aged 21 or over, each pair of adolescents aged 10-20 of the same sex, and each pair of children under 10. Any unpaired person aged 10-20 is notionally paired, if possible, with a child under 10 of the same sex, or, if that is not possible, he or she is counted as requiring a separate bedroom, as is any unpaired child under 10. This notional standard number of bedrooms is then compared with the actual number of bedrooms (including bed-sitters) available for the sole use of the household, and differences are tabulated. Bedrooms converted to other uses are not counted as available unless they have been denoted as bedrooms by the respondents; bedrooms not actually in use are counted unless uninhabitable.

Households are said to be overcrowded if they have fewer bedrooms available than the notional number needed. Households are said to be under-occupying if they have two or more bedrooms more than the notional needed.

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Table 16: Changes in overcrowding (2001-2011) – based on Room Standard

Overcrowded Overcrowded households households Change (no.) Change (%) (2001) (2011) Isle of Wight 2,774 3,536 762 27.5% South East 195,392 265,974 70,582 36.1% England 1,457,512 1,928,596 471,084 32.3% Source: Census 2001 and Census 2011

Vacant and Second Homes

5.60 The 2011 Census indicated that there were just over 6,500 vacant and second homes in the on the Isle of Wight (equivalent to 9.7% of the dwelling stock). This level is significantly higher than the regional (4.0%) and national (4.3%) averages. This reflects the Island’s status as a tourism destination.

Table 17: Vacant and Second Homes, 2011

Household spaces All categories: % Households with with no usual Dwelling type no usual residents residents

Isle of Wight 6,591 67,676 9.7% South East 148,710 3,704,173 4.0% England 980,729 23,044,097 4.3% Source: 2011 Census

Rates of Development

5.61 Figure 33 below profiles growth in dwelling stock over the 2001-11 decade. Over this period the housing stock grew by 10% on the Island, which was above the 8.3% growth recorded across England. The notably ‘above average’ housing growth is likely to have fed through to higher migration in comparative terms. This in turn can influence trend-based demographic projections.

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Figure 33: Growth in Dwelling Stock, 2001-12

Source: CLG, Table 125

5.62 Figure 34 shows the trend in net completions on the Island since 2001. This demonstrates a significant peak in development in 2007/6. Completions for the rest of the period have been modest with the lowest completion rate pre-recession (2004/5).

Figure 34: Net Completions 2001-2013

Source: DCLG

5.63 The South East Plan set a housing requirement for 520 homes per annum. Over the 2006-11 period (the period prior to the demographic projections) a total of 3,778 homes were delivered. This compares against a target for 2,600. Housing supply thus exceeded planned targets over the

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2006-11 period, meaning that there is shortfall in housing provision over the period prior to the projections set out in this report.

Table 18: Housing Completions35 Completions by year 2006 - 2012 Total Affordable Housing (March) Year included in total36 2006/07 1,622 151 2007/08 603 69 2008/09 635 117 2009/10 440 234 2010/11 455 111 2011/12 535 205 Source: Isle of Wight Council

In total 21% of new housing delivered over the 2006-12 period has been of affordable housing.

Drawing the Analysis Together

5.64 On the Island, and indeed across much of the country, there has been a fundamental shift in housing market conditions since 2007, particularly in relation to confidence and credit availability

5.65 Since the recession, the evidence indicates a substantial decline in effective demand from peak levels, with annual sales on the Island more than 45% down on pre-recession levels. The downturn in sales, driven by wider economic and market conditions, is likely to have resulted in some suppression of household formation since 2008.

5.66 House price patterns prior to the recession were broadly consistent with the national trends. Since the recession, our analysis shows negative growth. Overall, there is little evidence of a sharp recovery and, taking account of inflation then the decline is even more marked.

5.67 Detached house prices on the Island are significantly lower than the equivalent properties in the rest of the South East. Although still lower than the South East prices flatted stock has held up better than the other property types. This would suggest less of a fall in demand for smaller properties.

5.68 This pricing analysis translates somewhat into market affordability. Lower quartile affordability in compares quite favourably with the national ratio. Affordability issues are however more acute in lower quartile than median homes.

35 Island Plan Monitoring Report 2011/12 36 Source: IWC Safe and Secure Homes Statistics

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5.69 While over-crowding on the Island is much lower than the rest of the South East, there is a significant proportion of homes that are under-occupied. This is linked to the elderly population who are not downsizing in the numbers required. Using the occupancy rating, which measures the number of people in a household against the number of rooms in a home, occupancy rates have increased slightly. Overcrowding is however below average.

5.70 Housing delivery over the last 10 years has been relatively consistent with only a single year of significant growth. Post-recession levels of delivery are broadly in line with those prior to it. Housing completions have fallen since the onset of the economic recession in 2008, but over the 2006-11 period (prior to the demographic projections) they exceeded planned supply. There is thus no need to include any provision in calculating housing need for a past shortfall in delivery;

5.71 Given the evidence, we identify relatively modest market pressure on the Island. Affordability is an issue but this is not resulting in high levels of overcrowding. At a local level it has however driven a growth in renting of local households in the 2001-11 decade. There may be some case for considering increasing housing provision moving forwards in order to improve access to market housing for sale.

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6 ASSESSING FUTURE HOUSING REQUIREMENTS

Introduction

6.1 This section of the SHMA considers overall housing requirements on the Island. The analysis is prepared to meet the requirements of the NPPF which says the scale of housing required should be based on meeting ‘household and population projections, taking account of migration and demographic change’ (para 159) and the approach proposed in the draft Planning Practice Guidance. The analysis considers demographic trends and the relationship between population and employment growth. It also considers household formation rates and how these relate to housing market circumstances.

6.2 Section 7 in this SHMA report then deals with affordable housing need. The relationship between the projections herein and meeting affordable need are considered in drawing conclusions on Objectively Assessed Need for housing in Section 10 of the report.

6.3 We have run a total of nine separate projections covering a range of scenarios. The section below discusses the main scenarios in the context of the draft Planning Practice Guidance37 and provides the headline output in terms of housing need arising across the Island. Detailed population, employment and household outputs are set out in Appendix B.

6.4 Full details of the methodological approach taken in preparing the projections are set out in Appendix B along with a table summarising the key inputs and assumptions underpinning each projection.

2008-based Household Projections

6.5 The CLG 2011-based Household Projections take into account information from the 2011 Census, both on the size and structure of the population in 2011 and trends in household formation over the 2001-11 period. However the assumptions on rates of migration, births and deaths pre-date the release of data from the 2011 Census.

6.6 The previous set of household projections were the 2008-based Household Projections. These projections were informed by stronger levels of net migration to the Island over the preceding 5-year period (2003-8) and assumed that household formation rates were higher than those shown in the more recent 2011-based Household Projections. Household formation rates in these projections are informed by long-term trends recorded in the 1971, 1981, 1991 and 2001 Census; but have limited regard to changes in household formation rates post 2001.

37 CLG (August 2013) Draft Planning Practice Guidance – Assessment of Housing and Economic Development Needs

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6.7 The 2008-based Household Projections indicated an average annual growth of 824 households on the Island over the 2008-33 period used in the Projections.

Table 19: Projected Island Household Growth 2008-33 – CLG 2008-based Household Projections Households 2008 61,858 Households 2033 82,458 Change in households 20,600 Change per annum 824 % change from 2008 33.3% Source: CLG 2011-based Household Projections

2011-based Household Projections

6.8 The draft Planning Practice Guidance sets out that the latest Government Household Projections should be the starting point for considering housing need. At the time of writing these were the 2011-based Interim Household Projections from CLG (which are directly based on the 2011 based Interim Sub-National Population Projections (SNPP) prepared by ONS).

6.9 These projections are important as they provide a consistent approach where key inputs (such as levels of internal migration) sum at a national level. The draft Planning Practice Guidance encourages their use as a “starting point” for considering housing requirement, setting out that they are statistically robust and based on nationally consistent assumptions.

6.10 The SNPP is also a good source of data as it uses a ‘multi-regional’ model that studies migratory movements by age and sex between all local authorities in the country. It takes account of how the population in different areas is expected to change over time and how this might influence in- and out-migration. The SNPP is however limited by the accuracy of data underpinning it, such as migration which is notoriously difficult to accurately measure – particularly at smaller area level.

6.11 The 2011-based Household Projections cover the 10-year period to 2021 which is the full period covered by CLG. For the whole period studied these projections suggest a 9.2% increase in households. This is below the average growth expected in the South East (10.8%) and nationally (10.0%). The number of households is expected to grow by an average of 564 per annum to 2021.

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Table 20: Projected Island Household Growth 2011-21 – CLG 2011-based Household Projections Households 2011 61,107 Households 2021 66,746 Change in households 5,639 Change per annum 564 % change from 2011 9.2% Source: CLG 2011-based household projections

Issues with the Official Demographic Projections

6.12 The draft Planning Practice Guidance sets out that the 2011-based Household Projections are the appropriate starting point for considering housing need. However it sets out that:

“the 2011-based Interim Household Projections only cover a ten year period up to 2021, so plan makers would need to assess likely trends after 2021 to align with their development plans.”

6.13 It goes on to explain that “account should also be taken of the most recent demographic evidence, including the latest Office for National Statistics population estimates.”

6.14 However in the use of household projections, it cautions that “the household projections are trend based ... [they] 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.

6.15 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.”

6.16 Since the 2011-based Population and Household Projections were prepared, there have been a number of further releases of data from the Office for National Statistics:

 Revised Mid-Year Population Estimates and Components of Change for the 2001-11 period, taking into account the 2011 Census (released April 2013);  2012 Mid-Year Population Estimates (released June 2013).

6.17 A further issue is that the 2011-based Population and Household Projections (prepared by ONS and CLG respectively) run only to 2021. These are ‘interim’ projections rather than official statistics as they are based only on partial information from the 2011 Census.

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6.18 We have therefore developed an updated set of population projections following a two stage process:

 Firstly updating the demographic projections based on the latest evidence regarding population changes and extending the projections from 2021 to 2036;  Secondly considering issues related to household formation rates and adjusting the projections to reflect the relevant market and demographic evidence.

Extending the Projections to 2036 (PROJ 1)

6.19 Our first projection uses information in the ONS 2010- and 2011-based Sub-National Population Projections (SNPP). The last full set of SNPP published by ONS were 2010-based figures. These have subsequently been updated by 2011-based ‘Interim’ Projections which look at the ten year period to 2021. The 2011-based Interim SNPP (on which the household projections are based) use the same assumptions around fertility, mortality and migration profiles as 2010-based SNPP (based on pre-Census data). However the 2011-based figures have updated estimates of future levels of migration (both in- and out-migration and by type of migration (e.g. international vs. internal)) to take account of what the 2011 Census showed about the population structure.

6.20 The PROJ 1 projections therefore use the same assumptions as in the ONS 2010-based SNPP with regards to fertility, mortality and migration rates but with some adjustments to overall levels of migration on the basis of the 2011-based figures. The assumptions around fertility, mortality and the profile of migration by age group from the 2010-based SNPP are also used in all other projections within this report.

6.21 The 2011-based SNPP only projects for a ten-year period to 2021. Beyond 2021 we have used 2010-based SNPP data but adjusted this to take account of the differences shown between the 2010- and 2011-based versions of the SNPP. In keeping with the methodology used by ONS, figures for cross-border and international migration are held constant with internal migration figures changing slightly on the basis of the projected change in the 2010-based data (but from the adjusted baseline position for 2021 shown in 2011-based Projections).

6.22 The key issue here is that the 2011-based Population and Household Projections are based on data regarding trends regarding fertility, mortality and migration which pre-date the release of data from the 2011 Census. Projections for future housing need are particularly sensitive to assumptions regarding levels of migration and to household formation rates.

6.23 We have therefore examined the key migration inputs feeding into the SNPP in more detail, in particular seeking to reflect the 2011 Mid-Year Population Estimates and ONS’ revised data on components of change from 2001-11 (which have been rebased to take account of Census population estimates since the 2011-based SNPP was produced). We have also considered the

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implications of the 2012 Mid-Year Population Estimates which were published in June 2013 to ensure that the latest data is considered.

We have compared the levels of migration estimated by ONS at the time of its work on the 2011 SNPP and the revised estimated produced following the Census rebasing. Data for the five years to 2011 has been used. Across the Island, the most recent data suggested that population change was over-recorded by around 185 people per annum over this period. This is described in the ONS components of change as falling within the ‘other unattributable’ category, which effectively adjusts the components of population change. Taking a pragmatic approach to this data, we have assumed that around half of this figure is due to an over-recording of migration and have therefore slightly amended the migration assumptions in the projection to take account of this observation. Furthermore, it has been assumed that the apparent over-recording of migration is linked to levels of international out-migration (which is recognised as the hardest component of migration to measure). This forms the basis of our updated SNPP Projection.

6.24 In our view, PROJ 1 therefore represents a robust, demographic driven baseline or “starting point” for considering overall housing needs over the period to 2036. The table below summarises the household growth across the Island resulting from PROJ 1. For the whole period studied this projection suggests a need for an additional 532 homes per annum. This is equivalent to household growth of 20.2% over the period to 2036 (0.8% per annum).

Table 21: Projected Island Household growth 2011-36 – PROJ 1 Adjusted SNPP-based Household Projections Isle of Wight Households 2011 61,109 Households 2036 73,451 Change in households 12,342 Change per annum 494 % change from 2011 20.2% % change per annum 0.8% Change per annum (inc. 7.8% vacancy allowance) 532

Considering Household Formation Rates

6.25 The household formation (headship) rates in the 2011-based Household Projections are based on trends between 2001 and 2011. This is a period during which house prices rose substantially and affordability worsened both on the Island and across the wider South East (as outlined in Section 5).

6.26 The draft Planning Practice Guidance indicates that local planning authorities should take account of the implications of constrained or suppressed household formation. We have therefore first run a sensitivity analysis on PROJ 1 (Adjusted SNPP), applying headship rates from the 2008 based CLG

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Household Projections. The headship rates in the 2008-based Projections were published in advance of the release of 2011 Census data and are based on longer-term trends in household formation dating back to 1971.

6.27 The table below summarises the household growth across the Island resulting from PROJ 2. This indicates that stronger household formation could generate a need for 647 additional homes per annum across the Island, equivalent to an annual growth rate of around 1.0%. The impact of the CLG 2008-based headship rates on household formation (relative to those in the CLG 2011-based Household Projections) is therefore to increase housing need by around 22%.

Table 22: Projected Island Household growth 2011-36 – PROJ 2 Adjusted SNPP-based household projections with 2008 headship assumptions Isle of Wight Households 2011 61,109 Households 2036 76,106 Change in households 14,996 Change per annum 600 % change from 2011 24.5% % change per annum 1.0% Change per annum (Inc. 7.8% vacancy allowance) 647

6.28 We do however need to consider what has driven this change in household formation levels in order to assess what would represent an appropriate basis for projecting forwards. There are in effect two core factors which are likely to have influenced the deviation in household formation rates over the 2001-11 decade from the long-term trend:

 A constrained housing supply and worsening housing affordability over the decade; and  The impact of the downturn in the housing market and associated economic recession from 2008.

6.29 This issue is explored further below, where we consider in detail household formation rates. In effect these factors have influenced trends in household formation, and for instance trends in the proportion of people in their 20s and 30s who are a head of a household. As the 2011-based Household Projections are ‘projections’ where household formation rates have fallen, they are projected to continue to do so.

6.30 There is limited empirical data available at the local level which allows us to disaggregate the specific influence of these factors on the Island.

6.31 Recent national research indicates that around half of the change in assumptions between 2008 and 2011 can be attributed to economic and market conditions constraining household formation

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(although this will vary area by area) with around half of the change being due to changes in household structures (particularly linked to international migration)38.

6.32 This has lead us to develop a further projection (PROJ 3). This is based on the same projection for population growth as in PROJ 1 and PROJ 2, but adjusts household formation (headship) rates. Headship rates are set at a midpoint between the trends shown in the CLG 2008-based Household Projections for the Island and those the 2011-based Household Projections. This projection suggests a requirement for 589 additional homes in the period to 2036.

Table 23: Projected Island Household Growth 2011-36 – PROJ 3 Adjusted SNPP-based Household Projections with Midpoint Headship Assumptions Isle of Wight Households 2011 61,109 Households 2036 74,778 Change in households 13,669 Change per annum 547 % change from 2011 22.4% % change per annum 0.9% Change per annum (Inc. 7.8% vacancy allowance) 589

6.33 The potential reasons for changes to headship rates and how these should be projected forward are considered as part of our conclusions about overall housing requirements. We would consider that on the balance of evidence a midpoint headship rate is the most robust assessment of future housing requirements. This midpoint has been used in all other projections developed below.

6.34 This approach, based on assuming that household formation falls midway between levels shown in the 2008- and 2011-based CLG Household Projections, is consistent to the approach used to derive conclusions on housing need within the South Hampshire Strategic Housing Market Assessment (2014)39.

Considering Sensitivity to Migration Assumptions

6.35 As a sensitivity analysis, we have also run two additional projections based on different assumptions on migration:

 PROJ 4 – 10 year past migration trends

 PROJ 5 – 5 year past migration trends

38 Holmans, A (2013) New estimates of housing demand need in England, 2011 to 2031 39 GL Hearn (Jan 2014) South Hampshire Strategic Housing Market Assessment Version 1 – Final Report

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6.36 These projections take the average annual levels of net migration to the Island over the past 10 and 5 years respectively, and project these forward. The projections provide a sensitivity analysis to the main demographic-driven projections considered above, but do not fully take account of the implications of changes in the age structure of the Island’s population over the period to 2036 and how this can be expected to influence migration trends (in particular out-migration).

6.37 Detailed data about migration trends and overall population change can be found in Appendix B. For the purposes of the analysis here, information has been taken for the period 2002-12 and shows over the past decade an average net in-migration of 1,115 people; with a lower figure (657 per annum) over the last 5 years.

Table 24: Past trends in Net Migration Net migration 2002/3 1,544 2003/4 1,706 2004/5 1,787 2005/6 1,011 2006/7 953 2007/8 851 2008/9 147 2009/10 386 2010/11 399 2011/12 505 Average (past ten years) 1,115 Average (past five years) 657 Source: ONS

6.38 Migration figures can be somewhat variable over time. Variation could be linked to a number of factors such as completions levels (which could inhibit or provide greater opportunities for migration), year-on-year changes to specific parts of the population, such as students, and other demand factors influencing migration such as employment. Additionally, given the difficultly of measuring migration accurately, it is possible that year-on-year changes may influenced by recording issues, but this should be evened out by looking at 5 and 10 year averages.

6.39 Generally the highest estimated levels of migration were over the 2002-2007 period including a net in-migration of 1,787 people in 2004/5. This contrasts with some much lower levels of net in- migration in 2008/9 in particular (net in-migration of just 147 people).

6.40 In developing PROJ 4 and PROJ 5 we have simply taken an overall average (average annual migration) and projected this forward. A small adjustment has been made to the figures to take account of the apparent over-estimation of population growth (as was done in PROJ 1 to PROJ 3).

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A consistent assumption with earlier projections is that around half of the ‘other (unattributable)’ category of population change can be attributed to migratory factors.

6.41 On this basis, over the last ten years (2002-12) the average level of net migration has been an in- migration of 1,021 people with a notably lower figure (of 556) if we look at 5-year trends (2007-12). Both of these trend figures are below those shown in the SNPP which averages 1,355 per annum from 2011 to 2036 or about 1,263 when adjusted to take account of the latest demographic data (PROJ 1 to 3). The table below summarises the household growth across the Island resulting from PROJ 4 and 5.

Table 25: Projected Island Household Growth 2011-36 – PROJ 4 (10 yr Migration Trend) and PROJ 5 (5 yr Migration Trend) PROJ 4 PROJ 5 Households 2011 61,109 61,109 Households 2036 72,029 66,513 Change in households 10,920 5,403 Change per annum 437 216 % change from 2011 17.9% 8.8% % change per annum 0.7% 0.4% Change per annum (inc. 7.8% vacancy allowance) 471 233

6.42 Whilst PROJ 4 and PROJ 5 provide a useful sensitivity test, unlike PROJ 1-3 they are not “dynamic” in terms of the impact of population age profile on migration. As such, we consider that the dynamic projection (PROJ 3) is a more realistic and robust projection of future population. This is because it is reasonable (and logical) that levels of migration will change in the future as the population age structure across the Island changes and the population on the mainland continues to grow and change in structure as well over the plan period.

6.43 In effect, ONS population projections expect net migration to increase over time as we see some growth in in-migration relative to out-migration. The trend in out-migration in particular is linked to the older age structure of the Island’s population (with older people less likely to move off the Island).

Taking Account of Economic and Employment Trends

6.44 The draft Planning Practice Guidance highlights the need to consider the implications of economic and employment growth on housing need. The aim of this is to ensure that the conclusions drawn on objectively-assessed need for housing would not constrain economic growth. Specifically the Guidance sets out that:

“Where the supply of working-age population (labour force supply) is less than the projected job growth, this will result in unsustainable commuting patterns and could reduce the

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resilience of local businesses. In such circumstances, plan makers would need to consider increasing their housing numbers to address these problems.”

6.45 The Guidance specifically cautious against the use of economic forecasts to argue that housing provision below that indicated by demographic-driven projections.

6.46 The Solent Local Enterprise Partnership (LEP) has been working with Oxford Economics to develop forecasts for future employment growth which align to its emerging economic strategy. These take account of relevant economic drivers, opportunities and risks across the Solent LEP Area. This work forms part of the development of Solent LEP’s Strategic Economic Plan (SEP).

6.47 In this SHMA we have sought to consider how future economic growth on the Island may influence future population trends and housing need. It should also be borne in mind that economic forecasting is not an exact science and is more difficult to undertake accurately than projections for future population growth. How the economy might perform over the next 20+ years is somewhat uncertain. Relating economic performance to housing need is also not straightforward, and will be influenced by a range of factors including:

 Future economic and employment growth;

 Potential changes to commuting patterns;

 The relationship between growth in employment and the workforce; and

 The proportion of people (in different age groups) who are in work.

6.48 Employment rates moving forward are likely to be influenced by changes to pensionable ages and we may see some people work for longer. There are opportunities to reduce unemployment and worklessness as the economy improves. However how employment rates may change over the longer-term is more difficult to accurately predict.

6.49 Given these sensitivities, the economic-led projections presented should be considered indicative. They are based on (and sensitive to) multiple assumptions.

6.50 To provide an initial indication of the potential impact of employment growth on housing requirements on the Island, we have run the following two projections:

 PROJ A – Jobs Baseline

 PROJ B – Residents in Employment

6.51 In developing PROJ A and B we have drawn on the employment forecasts draw on initial forecasts for employment growth prepared by Oxford Economics. At this point in time these have not been agreed or finalised, and may change.

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6.52 The forecasts take account of past economic performance and assume that historical relationships between performance of different sectors locally relative to the region and UK hold true moving forward (so if a certain sector locally has seen a relative stronger growth rate in the past relative to the region, it is expected to continue to do so). The forecasts also take account of policy initiatives and intelligence at a local level and the Solent LEP’s emerging Strategic Economic Plan40.

6.53 For both projections, we have built in an assumption that employment rates will increase moving forward – assuming that unemployment levels fall over time and we see an increase in older people and women working (partly driven by changes to pensionable age).

6.54 However, we have applied different assumptions with regards to commuting as explained below. The detailed modelling assumptions are explained in Appendix B.

6.55 PROJ A assumes a 1:1 relationship between the number of jobs created and the number of local residents in employment. This projection essentially does not include any assumptions about commuting patterns with all new jobs being filled by local people (it can alternatively be viewed as being based on no changes to commuting patterns with equal numbers of people in- and out- commuting as a result of new employment opportunities). This projection sees an increase in the number of jobs of 3,291 over the 25-year period.

6.56 PROJ B draws on the Oxford Economics forecasts about the number of additional jobs forecast to be created but also considers commuting patterns (from 2001 Census data) to calculate a commuting ratio (the number of people who live on the Island and are working as a proportion of the total number of people who are in work). The ratio and its derivation is provided in Appendix B. This generates a very slightly higher projected increase in the number of residents in employment of 3,446 over the 25-year period.

6.57 Table 26 below shows the estimated increase in the number of residents in employment in five year periods for each of the two economic-led scenarios. The data shows that the strongest employment growth is expected in the 2016-21 period with weaker growth thereafter.

40 Solent LEP (Dec 2013) Transforming Solent – Solent Strategic Economic Plan 2014-20, Version 1

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Table 26: Employment Growth Assumptions used in Modelling Period PROJ A – Jobs Baseline PROJ B – Residents in Employment Annual 5-year total Annual 5-year total 2011-2016 190 951 199 996 2016-2021 309 1,546 324 1,619 2021-2026 82 411 86 430 2026-2031 38 189 40 198 2031-2036 39 193 40 202 Isle of Wight Total 3,291 3,446 Source: Oxford Economics, 2013

6.58 For the Island, the Oxford economic forecasts assume the following profile of employment growth by sector:

Table 27: Forecast Employment Growth by Sector, 2011-30 2011 Jobs 2011-30 % Change Agriculture, Forestry, Fishing, Mining 1,210 -285 -24% Manufacturing 5,021 -818 -16% Utilities 407 18 4% Construction 3,629 256 7% Wholesale & Retail 9,667 764 8% Transport, Storage & Comms 2,335 162 7% Accommodation & Food 7,423 -121 -2% IT, Media etc. 706 581 82% Financial & Business Services 3,662 1,145 31% Other Business Services 2,247 1,059 47% Public Administration 2,622 -757 -29% Education 5,390 -582 -11% Health 5,197 107 2% Residential Care & Social Work 5,386 942 17% Arts, Recreation & Other Services 4,002 680 17% Source: Oxford Economics, 2013

6.59 The Oxford Economics forecast run only to 2030, We have projected these forward post 2030 on the basis of the growth expected from 2024 to 2030 (i.e. the previous six years is projected forward for the next six years). This has been done on a linear basis.

6.60 The economic forecasts have then been fed through the demographic model. In doing so we consider how employment rates might change for different age groups, and overall adjust in- migration to support the identified expected scale of growth in the labour force.

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6.61 The table below summarises the household growth across the Island resulting from PROJ A and PROJ B. The outcomes of the two projections in terms of the level of housing need arising are broadly aligned at around 540 homes per annum over the period to 2036.

Table 28: Projected Island Household growth 2011-36 – PROJ A (Jobs Baseline) and PROJ B (Residents in Employment) PROJ A PROJ B Households 2011 61,109 61,109 Households 2036 73,603 73,747 Change in households 12,493 12,638 Change per annum 500 506 % change from 2011 20.4% 20.7% % change per annum 0.8% 0.8% Change per annum (inc. 7.8% vacancy allowance) 539 545

Taking the Analysis Forward

6.62 This section of the report has considered housing requirement taking into account projected population and economic growth. The latest (2011-based) household projections suggest household growth of 564 per annum over the period to 2021.

6.63 We have extended the projections to 2036 and updated them to take account of the latest demographic data. In doing so, we have also remodelled household formation rates to ensure that these do not project forward household formation rates which appear to have been historically suppressed. This is used to derive our main demographic-driven projection for housing need (PROJ 3) which indicates a need for 589 homes per annum over the period to 2036.

6.64 Forecast economic growth has then been overlaid on this to consider whether there is a need to adjust the projections of housing need upwards to ensure that housing provision does not constrain economic growth. The economic-driven projections indicate a need for at least 539-545 homes per year to 2036 in order to support forecast economic growth. This is lower than the demographic- driven need and thus an upwards adjustment is not justified in order to support economic growth.

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7 AFFORDABLE HOUSING NEEDS

Introduction

7.1 In this section we discuss levels of affordable housing need in the Isle of Wight and each of the eleven sub-areas. Housing need is defined in SHMA guidance as the quantity of housing required for households who are unable to access suitable housing without financial assistance. These households will be eligible for affordable housing. Affordable housing is defined in the National Planning Policy Framework, Annex 2, as “social rented, affordable rented and intermediate housing provided to eligible households whose needs are not met by the market.”

7.2 Government guidance on Strategic Housing Market Assessments sets out a model for assessing housing need (known as the Basic Needs Assessment Model). This model has been used herein.

7.3 It should be recognised that in establishing overall housing needs, evidence of both housing need and demand should both be considered. This section, addressing affordable housing need specifically, should be considered alongside the evidence of demand presented; and the demographic-led projections of need.

7.4 The analysis is based on secondary data sources. It draws on a number of sources of information including 2011 Census data, demographic projections, house prices/rents and income information.

7.5 The housing needs model is based largely on housing market conditions (and particularly the relationship of housing costs and incomes) at a particular point in time – the time of the assessment – as well as the existing supply of affordable housing (through relets of current stock) which can be used to meet housing need. On this basis, estimates of housing need are provided in this section for the 25-year period between 2011 and 2036.

7.6 Where sub-area data is provided this has been based on actual data where possible (e.g. from the 2011 Census). For some analysis the data is an apportionment based on characteristics of households and the housing stock in different locations. For example, data on the number of households living in shared ownership accommodation has been used to estimate the likely level of resales of such homes in each area. All of the analysis has been built up from sub-areas to provide Island-wide totals.

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Key Definitions

7.7 We begin by setting out key definitions relating to housing need, affordability and affordable housing.

Housing Need

7.8 Housing need is defined as the number of households who lack their own housing or who live in unsuitable housing and who cannot afford to meet their housing needs in the market.

Newly-Arising Need

7.9 Newly-arising (or future) need is a measure of the number of households who are expected to have an affordable housing need at some point in the future. In this assessment we have used trend data from the Continuous Recording of lettings (CORE) system along with demographic projections about the number of new households forming (along with affordability) to estimate future needs.

Supply of Affordable Housing

7.10 An estimate of the likely future supply of affordable housing is also made (drawing on secondary data sources about past lettings). The future supply of affordable housing is subtracted from the newly-arising need to make an assessment of the net future need for affordable housing.

Affordability

7.11 Affordability is assessed by comparing household incomes, based on income data modelled using a number of sources including CACI Paycheck Data, the Annual Survey of Hours and Earnings (ASHE), the English Housing Survey (EHS) and ONS data, against the cost of suitable market housing (to either buy or rent). Separate tests are applied for home ownership and private renting (in line with the SHMA Guidance) and are summarised below:

 Assessing whether a household can afford home ownership: A household is considered able to afford to buy a home if it costs 3.5 times the gross household income – CLG guidance suggests using different measures for households with multiple incomes (2.9) and those with a single income (3.5), however (partly due to data availability) we have only used a 3.5 time multiplier for analysis. This ensures that housing need figures are not over-estimated – in practical terms it makes little difference to the analysis due to the inclusion of a rental test (below) which tends to require lower incomes for households to be able to afford access to market housing;  Assessing whether a household can afford market renting: A household is considered able to afford market rented housing in cases where the rent payable would constitute no more than 30% of gross income. CLG guidance suggests that 25% of income is a reasonable start point but suggests that a higher figure could be used. In the Isle of Wight the 25% figure has been changed to 30% for affordability testing – this is in line with work carried out elsewhere including the PUSH SHMA.

7.12 It should be recognised that a key challenge in assessing housing need using secondary sources is the lack of information available regarding households’ existing savings. This is a key factor in

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affecting the ability of young households to purchase housing particularly in the current market context where a deposit of at least 10% is typically required for the more attractive mortgage deals. However in many cases households who do not have sufficient savings to purchase have sufficient income to rent housing privately without support, and thus the impact on the overall assessment of housing need is limited.

Affordable Housing

7.13 The NPPF provides the definition of affordable housing (as used in this report). The following is taken from Annex 2 of NPPF.

“Affordable housing includes social rented, affordable rented and intermediate housing, provided to specified eligible households whose needs are not met by the market. Affordable housing should:

 Meet the needs of eligible households including availability at a cost low enough for them to afford, determined with regard to local incomes and local house prices;  Include provision for the home to remain at an affordable price for future eligible households or, if these restrictions are lifted, for the subsidy to be recycled for alternative affordable housing provision.”

7.14 Within the definition of affordable housing there is also the distinction between social rented affordable rented, and intermediate housing. Social rented housing is defined as:

“Rented housing owned and managed by local authorities and registered social landlords, for which guideline target rents are determined through the national rent regime. It may also include rented housing owned or managed by other persons and provided under equivalent rental arrangements to the above, as agreed with the local authority or with the Homes and Communities Agency as a condition of grant.”

7.15 Affordable rented housing is defined as:

“Rented housing let by registered providers of social housing to households who are eligible for social rented housing. Affordable Rent is not subject to the national rent regime but is subject to other rent controls that require a rent of no more than 80 per cent of the local market rent (including service charges, where applicable).”

7.16 The definition of intermediate housing is shown below:

“Intermediate affordable housing is ‘Housing at prices and rents above those of social rent, but below market price or rents. These can include shared equity products (e.g. HomeBuy), other low cost homes for sale and intermediate rent but does not include affordable rented housing.”

7.17 As part of our analysis in this report we have therefore studied the extent to which both social rented, intermediate housing and affordable rented housing can meet housing need on the Island.

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Survey of Local Prices & Rents

7.18 An important part of the SHMA is to establish the entry-level costs of housing to buy and rent – this data is then used in the assessment of the need for affordable housing. The housing needs assessment compares prices and rents with the incomes of households within the Council area to establish what proportion of households can meet their needs in the market, and what proportion require support and are thus defined as having a ‘housing need.’

7.19 In this section we establish the entry-level costs of housing to both buy and rent across the Island. Our approach has been to carry out a desktop survey using internet sources. We looked at prices and rents for different sizes of property from one to four bedrooms. For the purposes of analysis (and to be consistent with CLG guidance) we have taken lower quartile prices and rents to reflect the entry-level point into the market.

7.20 Figure 35 below shows estimated lower quartile property prices and rents obtained from this search for the whole Island. The prices of homes to buy have been reduced slightly (on average by about 6%) to take account of the difference between asking prices and prices paid based on information from the Hometrack website41.

7.21 The data shows that entry-level costs to buy are estimated to start from about £79,000 for a one- bedroom home and rising to £235,000 for four bedrooms. For privately renting the costs range from £425 to £800 per month depending on the size of property.

Figure 35: Entry-level Purchase Price and Private Rent Lower quartile prices Lower quartile private rents

£235,000

£900 £800

£250,000 £800

£665

£165,000 £700

£200,000 £545 £600

£118,000

£425 £150,000 £500

£79,000 £400 £100,000 £300

£200

£50,000 Entry-levelprivate month)(perrent Entry-levelpurchase price (£'000s) £100

£0 £0 1 bedroom 2 bedrooms 3 bedrooms 4 bedrooms 1 bedroom 2 bedrooms 3 bedrooms 4 bedrooms

Source: Online Estate and Letting Agents Survey (December 2013)

41 www.hometrack.co.uk

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7.22 Figure 36 below shows the volume of properties for sale and rent in the study area. The data clearly shows that the sale market is biased towards larger properties with the opposite being true for private rentals. In total, some 60% of homes advertised for sale had three or more bedrooms compared with just 36% of homes to rent. It is also notable that nearly a fifth of homes to rent had only one-bedroom (compared with just 7% of sale properties).

Figure 36: Volume of properties advertised for Sale and Rent

To buy 7.4% 32.6% 34.5% 25.5%

To rent 18.0% 45.9% 24.6% 11.5%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

1 bedroom 2 bedrooms 3 bedrooms 4+ bedrooms

Source: Online Estate and Letting Agents Survey (December 2013)

7.23 In addition to rental costs from our desk based research we have looked at the maximum amount of Local Housing Allowance (LHA) payable on different sized properties within the Island. Maximum LHA payments are based on estimates of rents at the 30th percentile and should therefore be roughly comparable with our estimates of lower quartile costs.

7.24 Table 29 below compares the LHA payment limits for the Isle of Wight Broad Rental Market Area (BRMA)42 with our estimates of rental costs from the market survey. There are some differences between the LHA maximum levels and the market survey estimates. In general the market survey estimates are slightly higher (for all property sizes other than one bedroom homes) – this would suggest that some households may have to ‘top-up’ their rents to be able to afford housing. Overall however the BRMA data tends to support the outputs of the market survey.

7.25 To the table below we have also added LHA rates for room only accommodation. The amount able to be claimed for a room is around 75% of the figure for a self-contained one bedroom property.

42 This is defined by the Valuation Office Agency (VOA)

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Table 29: Maximum LHA payments by Size Size LHA limit Market survey Room only £297 - 1 bedroom £400 £425 2 bedrooms £525 £545 3 bedrooms £650 £665 4 bedrooms £813 £800 Source: Valuation Office Agency (VOA) data (December 2013) and Market Survey (December 2013)

Cost of Affordable Housing

7.26 Traditionally the main type of affordable housing available in an area is social rented housing and the cost of social rented accommodation by dwelling size can be obtained from Continuous Recording (CORE) - a national information source on social rented lettings. The table below illustrates the rental cost of lettings of social rented properties by size in 2012/13. As can be seen the costs are notably below those for private rented housing indicating a gap between the social rented and market sectors. This gap increases for larger properties.

Table 30: Monthly average social rent levels – Isle of Wight Size Monthly rent (including service charges) 1 bedroom £369 2 bedrooms £389 3+ bedrooms £444 Source: CORE (2013)

7.27 Changes in affordable housing provision has seen the introduction of a new tenure of affordable housing (Affordable Rented). Affordable rented housing is defined in the NPPF as being ‘let by local authorities or private registered providers of social housing to households who are eligible for social rented housing. Affordable Rent is subject to rent controls that require a rent of no more than 80% of the local market rent (including service charges, where applicable)’.

7.28 Affordable Rented housing can therefore be considered to be similar to social rented housing but at a potentially higher rent. The 80% (maximum) rent is to be based on the open market rental value of the individual property and so it is not possible to say what this will exactly mean in terms of cost (for example the rent for a two-bedroom flat is likely to be significantly different to a two-bedroom detached bungalow). In addition, market rents for newbuild homes are likely to be higher than within the existing stock and may well be in excess of 80% of lower quartile rents.

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7.29 However, for the purposes of analysis we have assumed that the 80% figure can be applied to the lower quartile private rented cost data derived from our market survey. This has been applied on a sub-area basis and figures are presented below.

Gaps in the Housing Market

7.30 Table 31 below estimates how current prices and rents on the Island might equate to income levels required to afford such housing. The figures are based on the figures derived in the analysis above and include four different tenures (buying, private rent, affordable rent and social rent). The bottom row of data (which has been taken forward for the purposes of affordability testing) is taken as the lower quartile price/rent across the whole stock of housing available (i.e. including all property sizes).

7.31 The data clearly indicates a gap between the costs of ‘entry-level’ market housing and the social rented sector – demonstrating the potential for intermediate and affordable rented housing to meet some of the affordable need.

Table 31: Indicative income required to purchase/rent without additional subsidy Dwelling size Lower quartile Lower quartile Affordable rent Lower quartile purchase price private rent social rent 1 bedroom £22,600 £17,000 £13,600 - 2 bedrooms £33,700 £21,800 £17,400 - 3 bedrooms £47,100 £26,600 £21,300 - 4 bedrooms £67,100 £32,000 £25,600 - All dwellings £40,300 £20,000 £16,000 £14,900 Source: Online Estate and Letting Agents Survey (December 2013) and CORE

7.32 For illustrative purposes the calculations are based on 3.5 times household income for house purchase and 30% of income to be spent on housing for rented properties. The figures for house purchase are based on a 100% mortgage for the purposes of comparing the different types of housing.

Income levels and affordability

7.33 Following on from our assessment of local prices and rents it is important to understand local income levels as these (along with the price/rent data) will determine levels of affordability and also provide an indication of the potential for intermediate housing to meet housing needs. Data about total household income has been modelled on the basis of a number of different sources of information to provide both an overall average income and the likely distribution of incomes in each area. The key sources of data include:

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 CACI from Wealth of the Nation 201243 – to provide an overall national average income figure for benchmarking.  English Housing Survey – to provide information about the distribution of incomes (taking account of variation by tenure in particular)  Annual Survey of Hours and Earnings (ASHE) – to assist in looking at differences between local authority area (but recognising that this source only provides data about people in employment)  ONS modelled income estimates – to assist in providing more localised income estimates (e.g. for the eleven sub-areas)

7.34 Drawing all of this data together we have therefore been able to construct an income distribution for the whole of the Isle of Wight and individual sub-areas for 2013. Figure 37 shows the distribution of household incomes for the whole of the Island. The data shows that around two-fifths of households have an income below £20,000 with a further fifth in the range of £20,000 to £30,000. The overall average (median) income of all households was estimated to be around £23,700 with a mean income of £31,300.

Figure 37: Distribution of Household Income – Isle of Wight

35% 30.4% 30%

25% 19.6% 20%

15% 13.6% 11.5% 10% 8.2% 5.6% Proportionhouseholdsof groupin 4.7% 3.9% 5% 2.5%

0% Under 10k £10k to £20k to £30k to £40k to £50k to £60k to £80k to Over £100k £20k £30k £40k £50k £60k £80k £100k

Source: Derived from ASHE, Experian, SEH, CACI and ONS data

7.35 Table 32 below shows how income levels vary for each of the eleven sub-areas. Incomes were found to be highest in Rural West Wight and lowest in Ventnor. Overall, the analysis suggests that the highest incomes (in Rural West Wight) are on average around 28% higher than in Ventnor.

43 CACI (2012) Wealth of the Nation

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Table 32: Income levels by Sub-Area Sub-area Mean income Median income Cowes £33,075 £25,156 East Cowes £29,930 £22,764 Wootton £34,159 £25,981 Ryde £28,520 £21,692 East Wight £32,695 £24,867 Rural East Wight £33,834 £25,733 The Bay £28,164 £21,421 Ventnor £27,978 £21,280 Rural West Wight £35,786 £27,218 Newport £32,695 £24,867 West Wight £30,255 £23,012 Island-wide £31,296 £23,696 Source: Derived from ASHE, Experian, SEH, CACI and ONS data

7.36 To assess affordability we have looked at households ability to afford either home ownership or private rented housing (whichever is the cheapest), without financial support. The distribution of household incomes, within each area, is then used to estimate the likely proportion of households who are unable to afford to meet their needs in the private sector without support, on the basis of existing incomes. This analysis brings together the data on household incomes with the estimated incomes required to access private sector housing.

7.37 Table 33 shows across the Island that it is estimated that around 42% of households are unable to access market housing on the basis of income levels. This is a theoretical assessment based on income and does not take account of household circumstances and existing equity. There are some differences between areas (consistent with the income analysis shown above) with an estimated 47% of households in Ventnor being unable to afford compared with 36% in Rural West Wight.

7.38 It should be remembered that this analysis only considers income levels and not a full range of financial information (such as savings and equity). In the Council area where around 70% of households are already owner-occupiers it is clear that a proportion will have sufficient funds to be able to access housing were there to be a need to move home. The lack of information about savings and equity does not fundamentally impact on the overall housing needs analysis which is predominantly focussed on non-owners.

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Table 33: Estimated Proportion of Household Unable to Afford Market Housing without Subsidy Area Number unable to Estimated households % of households afford (2013) unable to afford Cowes 2,570 6,566 39.1% East Cowes 1,503 3,442 43.6% Wootton 1,167 3,099 37.7% Ryde 3,947 8,591 46.0% East Wight 1,803 4,548 39.6% Rural East Wight 1,747 4,580 38.2% The Bay 4,508 9,684 46.5% Ventnor 1,360 2,903 46.9% Rural West Wight 1,553 4,355 35.7% Newport 4,124 10,400 39.7% West Wight 1,714 3,972 43.1% Island-wide 25,996 62,140 41.8% Source: Online Estate and Letting Agents Survey (December 2013) and Income modelling

Affordable Housing Needs Assessment

7.39 Affordable housing need has been assessed using the Basic Needs Assessment Model, in accordance with the CLG Practice Guidance. This model is summarised in the chart below.

Figure 38: Overview of Basic Needs Assessment Model

Future Housing Need Current Housing Need (Gross) Estimate of Newly-Forming Households in Need & Existing Current Households in Housing Households falling into Need Need based on Census and over plan period Net Total Net other modelled data Housing Current Need Need Arising Affordable Housing Affordable Housing Supply Supply

Estimate of Supply of Affordable Total Net Current Need Supply of Affordable Housing Housing from Relets of Existing Over plan period from Vacant Stock & Properties over plan period Development Pipeline

7.40 The figures presented in this report for affordable housing needs have been based on secondary data sources including analysis of 2011 Census data. The housing needs modelling undertaken provides an assessment of annual housing need (which is then used to look at the period to 2036). Each of the stages of the housing needs model calculation are discussed in more detail below.

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Current Housing Need (Backlog)

7.41 In line with CLG guidance, the backlog of affordable housing need has been based on estimating the number of households living in unsuitable housing along with consideration of their current tenure and affordability. Unsuitability is based on the number of households shown to be overcrowded in the 2011 Census along with an estimate of other needs which have been modelled by comparing the tenure profile in each area with information from previous surveys about households in need. Much of these additional needs are found in the private rented sector and relate to issues around security of tenure and housing costs.

7.42 Overall, this analysis suggests that there are around 3,100 households living in unsuitable housing (across all tenures). The data modelling estimates housing unsuitability by tenure and from these figures households living in affordable housing are excluded (as these households would release a dwelling on moving and so no net need for affordable housing will arise). The analysis also excludes all outright owners under the assumption (which is supported by analysis of survey data) that they will have sufficient equity to move and 90% of owners with a mortgage. Again analysis of a range of recent surveys indicates that the vast majority of owners with a mortgage are able to afford housing once savings and equity are taken into account.

7.43 At the time of the assessment there were an estimated 1,622 households living in unsuitable housing (excluding current social tenants and the majority of owner-occupiers) – this represents 2.6% of all households on the Island. The figure below shows the current locations of these households by sub-area – the data suggests some variation across locations with an estimated 4.3% of households in Ryde living in unsuitable housing compared with just 1.5% in Rural West Wight.

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Table 34: Estimated number of households in unsuitable housing Area In unsuitable Total number of % in unsuitable housing households housing Cowes 167 6,566 2.5% East Cowes 84 3,442 2.4% Wootton 52 3,099 1.7% Ryde 367 8,591 4.3% East Wight 75 4,548 1.6% Rural East Wight 77 4,580 1.7% The Bay 290 9,684 3.0% Ventnor 86 2,903 3.0% Rural West Wight 67 4,355 1.5% Newport 277 10,400 2.7% West Wight 81 3,972 2.1% Island-wide 1,622 62,140 2.6% Source: Census (2011) and data modelling

7.44 Our estimated level of backlog need is therefore 1,622. We can however additionally consider the fact that a number of these households might be able to afford market housing without the need for subsidy. For an affordability test we have used the income data and adjusted the distribution to reflect the fact that typically households living in unsuitable housing have an average income which is around 69% of the figure for all households in an area. Overall, around 40% of households with a current need are estimated to be likely to have sufficient income to afford market housing and so our estimate of the total backlog need is reduced to 970 households.

Table 35: Estimated Backlog Need by Sub-Area

Area In unsuitable % Unable to Revised Gross housing Afford Need (including Affordability) Cowes 167 57.2% 96 East Cowes 84 61.7% 52 Wootton 52 55.7% 29 Ryde 367 64.0% 234 East Wight 75 57.7% 43 Rural East Wight 77 56.1% 43 The Bay 290 64.6% 187 Ventnor 86 64.8% 56 Rural West Wight 67 53.2% 36 Newport 277 57.7% 160 West Wight 81 61.2% 50 Island-wide 1,622 59.8% 970 Source: Census (2011), data modelling and income analysis

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Newly-Arising Need

7.45 To estimate newly-arising (projected future) need we have looked at two key groups of households based on the CLGs SHMA Guidance. These are:

 Newly forming households; and  Existing households falling into need.

Newly-Forming Households

7.46 For newly-forming households we have estimated (through our demographic modelling) the number of new households likely to form per annum over each five year period from 2011 to 2036 and then applied an affordability test. This has been undertaken by considering the changes in households in specific 5-year age bands in 2016, 2021, 2026 etc. relative to numbers in the age band below 5 years previously to provide an estimate of gross household formation. This differs from numbers presented in the demographic projections which are for net household growth. The number of newly-forming households is limited to households forming who are aged under 45 – this is consistent with CLG guidance which notes after age 45 that headship (household formation) rates ‘plateau’. There may be a small number of household formations beyond age 45 (e.g. due to relationship breakdown) although the number is expected to be fairly small when compared with formation of younger households.

7.47 The estimates of gross new household formation have been based on outputs from our projection linked to the adjusted SNPP. In looking at the likely affordability of newly-forming households we have drawn on data from previous surveys. This establishes that the average income of newly- forming households is around 84% of the figure for all households. This figure is remarkably consistent across areas (and is also consistent with analysis of English Housing Survey data at a national level).

7.48 We have therefore adjusted the overall household income data to reflect the lower average income for newly-forming households. The adjustments have been made by changing the distribution of income by bands such that average income level is 84% of the all household average. In doing this we are able to calculate the proportion of households unable to afford market housing without any form of subsidy (such as LHA/HB). Our assessment suggests that overall around half of newly- forming households will be unable to afford market housing – the annual estimated level of need varies between 16 in Wootton and 86 in Newport.

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Table 36: Estimated Level of Housing Need from Newly Forming Households (per annum) Area Number of new % unable to Total in need households afford Cowes 109 47.2% 52 East Cowes 53 52.3% 28 Wootton 34 45.7% 16 Ryde 152 54.9% 84 East Wight 46 47.7% 22 Rural East Wight 60 46.1% 28 The Bay 122 55.5% 68 Ventnor 35 55.8% 19 Rural West Wight 50 43.5% 22 Newport 180 47.8% 86 West Wight 41 51.8% 21 Island-wide 884 50.3% 445 Source: Projection Modelling/Income analysis

Existing Households falling into Housing Need

7.49 The second element of newly arising need is existing households falling into need. This is an estimate of the number of households currently living independently on the Island whose circumstance will change such that there is a requirement for affordable housing.

7.50 To assess this we have used information from CORE. We have looked at households who have been housed over the past three years with data then being annualised - this group will represent the flow of households onto the Housing Register. From this we have discounted any newly forming households (e.g. those currently living with family) as well as households who have transferred from another social rented property. An affordability test has also been applied, although relatively few households are estimated to have sufficient income to afford market housing.

7.51 This method for assessing existing households falling into need is consistent with the SHMA guide which says on page 46 that ‘Partnerships should estimate the number of existing households falling into need each year by looking at recent trends. This should include households who have entered the housing register and been housed within the year as well as households housed outside of the register (such as priority homeless households applicants)’.

7.52 The table below therefore shows our estimate of likely new need from existing households per annum by location. The data shows an additional need arising from 291 households, with a notably high proportion of these being in Newport and Ryde.

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Table 37: Estimated level of Housing Need from Existing Households (per annum) Area Number of Existing % of Need Households falling into Need Cowes 18 6.3% East Cowes 23 8.0% Wootton 6 1.9% Ryde 51 17.6% East Wight 12 4.1% Rural East Wight 17 5.7% The Bay 46 16.0% Ventnor 16 5.5% Rural West Wight 15 5.0% Newport 68 23.3% West Wight 19 6.5% Island-wide 291 100.0% Source: CORE/affordability analysis

7.53 Estimates of total future housing need which is likely to arise each year moving forward are shown below, by combining the estimates of need arising from newly-forming households and from existing households falling into need. Total newly-arising need is estimated at 735 households over the per annum in the period up to 2036.

Table 38: Estimated Future Housing Need (per annum) Area Newly-forming Existing Total Newly- Households in Households Arising Need (per Need falling into Need annum) Cowes 52 18 70 East Cowes 28 23 51 Wootton 16 6 21 Ryde 84 51 135 East Wight 22 12 34 Rural East Wight 28 17 44 The Bay 68 46 114 Ventnor 19 16 35 Rural West Wight 22 15 37 Newport 86 68 154 West Wight 21 19 40 Island-wide 445 291 735

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Supply of Affordable Housing

7.54 The future supply of affordable housing is the flow of affordable housing arising from the existing stock that is available to meet future need. It is split between the annual supply of social/affordable rent relets and the annual supply of relets/sales within the intermediate sector.

7.55 The Practice Guidance suggests that the estimate of likely future relets from the social/affordable rented stock should be based on past trend data which can be taken as a prediction for the future. We have used information from the Continuous Recording system (CORE) to establish past patterns of social/affordable rented housing availability. Our figures include general needs and supported lettings but exclude lettings to new properties plus an estimate of the number of transfers from other social/affordable rented homes. These exclusions are made to ensure that the figures presented reflect relets from the existing stock.

7.56 On the basis of past trend data is has been estimated that 457 units of social/affordable rented housing are likely to become available each year moving forward.

Table 39: Analysis of past social/affordable rented housing supply (per annum - Past 3 Years) Total lettings 759 % as non-newbuild 85.4% Lettings in existing stock 648 % non-transfers 70.5% Total lettings to new tenants 457 Source: CORE

7.57 The supply figure is for social/affordable rented housing only and whilst the stock of intermediate housing on the Island is not significant compared to the social/affordable rented stock it is likely that some housing does become available each year (e.g. resales of shared ownership). For the purposes of this assessment we have estimated the likely size and turnover in the intermediate stock on the basis of 2011 Census data. From this it is estimated that around 13 additional properties might become available per annum.

7.58 The total supply of affordable housing is therefore estimated to be 469 per annum. Table 40 below shows the locations where supply is expected to arise. The sub-area estimates have been calculated on the basis of the current stock of affordable housing within each location.

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Table 40: Supply of Affordable Housing by Sub-Market Area Social/affordable Intermediate Total supply (per rented relets housing ‘relets’ annum) Cowes 30 1 30 East Cowes 36 1 38 Wootton 9 2 11 Ryde 78 1 79 East Wight 19 1 20 Rural East Wight 27 0 27 The Bay 70 3 74 Ventnor 24 0 25 Rural West Wight 25 0 25 Newport 109 2 110 West Wight 29 1 30 Island-wide 457 13 469 Source: Derived from CORE and Census (2011) analysis

Net Housing Need

Excluding Development Pipeline

7.59 The table below shows our overall calculation of housing need. This excludes supply arising from sites with planning consent (the ‘development pipeline’). The analysis has been based on meeting housing need over the 25-year period from 2011 to 2036. Whilst most of the data in the model are annual figures the backlog has been divided by 25 to make an equivalent annual figure.

7.60 The data shows an overall need for affordable housing of 7,611 units over the 25-year period from 2011 to 2036 (304 per annum). The net need is calculated as follows:

Net Need = Backlog Need + Need from Newly-Forming Households + Existing Households falling into Need – Supply of Affordable Housing

Table 41: Estimated level of Housing Need (2011-36) Per annum 25-years Backlog need 39 970 Newly forming households 445 11,113 Existing households falling into need 291 7,265 Total Gross Need 774 19,348 Supply 469 11,737 Net Need 304 7,611 Source: Census (2011)/CORE/Projection Modelling and affordability analysis

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7.61 Table 42 shows the annualised information for individual sub-areas. The analysis shows a need for additional affordable housing in all areas with Ryde seeing the highest need (about 21% of the total).

Table 42: Estimated Level of Housing Need (per annum) Area Backlog Newly Existing Total Supply Net Need need forming household Need household s falling s into need Cowes 4 52 18 74 30 44 East Cowes 2 28 23 53 38 16 Wootton 1 16 6 22 11 11 Ryde 9 84 51 144 79 65 East Wight 2 22 12 36 20 16 Rural East Wight 2 28 17 46 27 19 The Bay 7 68 46 121 74 48 Ventnor 2 19 16 38 25 13 Rural West Wight 1 22 15 38 25 13 Newport 6 86 68 160 110 50 West Wight 2 21 19 42 30 12 Island-wide 39 445 291 774 469 304 Source: Census (2011)/CORE/Projection Modelling and affordability analysis

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Including Development Pipeline

7.62 Table 43 below includes within the analysis the supply of affordable housing expected to come forward on sites with planning permission. This reduces the net need for affordable housing to 284 homes per annum. Figures at sub-market levels are shown in the Table below.

Table 43: Annual Need for Affordable Housing (including Development Pipeline)

Supply from Relets Supply

households fallinghouseholds Need Arising Total

Pipeline SupplyPipeline

Newly forming forming Newly

Ho

Backlog Need Backlog

Net Need per Need Net

households

Net Current Net

Per Annum Per Annum Per

into need into

using Need using

Existing Existing

Annum

Area

Cowes 96 0 96 52 18 70 30 43 East 52 200 -148 28 23 51 38 9 Cowes Wootton 29 0 29 16 6 22 11 12 Ryde 234 69 165 84 51 135 79 61 East Wight 43 0 43 22 12 34 20 15 Rural East 43 0 43 28 17 45 27 19 Wight The Bay 187 0 187 68 46 114 74 45 Ventnor 56 0 56 19 16 35 25 12 Rural West 36 36 22 15 37 25 13 Wight Newport 160 80 80 86 68 154 110 46 West Wight 50 30 20 21 19 40 30 11

Island-wide 970 379 591 445 291 736 469 284

Role of the Private Rented Sector in Meeting Housing Need

7.63 The Strategic Housing Market Assessment Guidance requires consideration of the extent of the private rented sector (through the Local Housing Allowance (LHA) system) and its ability to meet the needs of households. We have therefore used data from the Department of Work and Pensions (DWP)44 to look at the number of LHA supported private rented homes. As of August 2013 it is estimated that there were 6,009 benefit claimants in the private rented sector on the Isle of Wight. This is 20% higher than the number observed four years earlier (in August 2009).

44 https://www.gov.uk/government/organisations/department-for-work-pensions/about/statistics

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7.64 What this information does not tell us is how many lettings are made each year to tenants claiming benefit as this will depend on the turnover of stock. From English Housing Survey we estimate that the proportion of households within the private sector who are “new lettings” each year (i.e. stripping out the effect of transfers) is around 13%. Applying this to the number of LHA claimants in the private rented sector gives us an estimate of 781 private sector lettings per annum to new LHA claimants on the Island. This figure is derived from claimants rather than households and it is possible that there are a number of multiple LHA claimant households (i.e. in the HMO sector) which would reduce this estimate somewhat.

7.65 The overall estimated number of lettings in the LHA part of the PRS can be seen to be in excess of the total net need derived through housing needs analysis. It is not however appropriate to treat this sector as a form of affordable housing and net it from the overall annual housing needs estimate of 304 affordable homes per annum. Neither the SHMA Guidance (CLG, 2007) nor the NPPF (CLG, 2012) recognise this sector as affordable housing.

7.66 However, it should be recognised that, in practice, the private rented sector does make a significant contribution to filling the gap in relation to meeting housing need and given the levels of affordable housing need shown in this study, the private rented sector is likely to continue to be used to some degree to make up for the shortfall of genuine affordable housing for the foreseeable future. For some households living in private rented accommodation is not secure or affordable; and there can be no guarantee that the sector will continue to provide a supply of housing which is affordable to local households (taking into account national legislation which caps rental growth).

Understanding the Context to the Housing Needs Assessment

7.67 The housing needs analysis concludes that there is a shortfall of 304 affordable homes per annum over the period from 2011 to 2036 (7,611 in total). This falls to a need for 284 affordable homes per year if housing in the development pipeline is take out. However there are a number of things that need to be remembered in interpreting the housing needs analysis.

7.68 The Basic Needs Assessment Model which has been used was designed specifically to identify whether there is a shortfall or surplus of affordable housing. The needs assessment therefore does not look at all housing needs, but specifically the needs of those who can’t afford market housing (assuming no more than 30% of households’ gross income is spent on housing costs). It assumes that all households are adequately housed in a home that they can afford.

7.69 The needs assessment is a ‘snapshot’ assessment at a point in time, which is affected by the differential between housing costs and incomes at that point; as well as the existing supply of

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affordable housing. In the case of the Isle of Wight, the stock of affordable housing (social rented) has increased by about 13% over the last decade which is more than the overall increase in households (6%). However, the turnover of stock has generally decreased over time. This has affected the level of affordable housing need. The shortfall of affordable housing identified is affected by past investment decisions.

7.70 Moreover, as the Basic Needs Assessment Model is designed to identify a shortfall of genuine affordable housing, it assumes that all households in ‘housing need’ are housed in affordable homes (which includes provision that the home remains at an affordable price for future eligible households).

7.71 In reality, there are two key factors which need to be considered:

 Some households defined as in housing need may choose to spend more than 30% of their gross income on housing costs or may not actively seek an affordable home; and  Some households defined as in housing need are accommodated in the Private Rented Sector, supported by Local Housing Allowance.

7.72 It is estimated that there are currently over 6,000 Local Housing Allowance claimants housed in the Private Rented Sector with other households expected to be in this sector and paying more than 30% of their income on housing but not claiming Housing Benefit (for example a single person might need to see their housing costs get up to around 45%-50% of rent before getting Housing Benefit (although other benefits such as working tax credits will kick in below this level)).

7.73 As the level of housing need is very sensitive to differences between housing costs and incomes, changes in the difference between incomes and housing costs over time will affect the level of housing need identified.

7.74 The private rented sector should not be seen as a form of affordable housing, however it does have a role which should be recognised. It is very difficult to quantify people in the private rented sector (e.g. there may be people who live in private rented accommodation who do not qualify for affordable housing) and therefore gathering evidence to show that there is a shortfall in overall housing provision to meet local housing requirements over and above that shown by the demographic modelling is extremely difficult (albeit there is arguably some tenure mismatch with households living in the private rented sector when a social/affordable rented home would be more suitable). The affordable housing needs analysis per se therefore does not provide a basis for considering overall future housing requirements or whether there is a backlog of housing that has not been delivered in the recent past.

7.75 Given the current stock of affordable housing in the area, the funding mechanisms for delivery of new affordable housing and policies affecting sales of existing properties, it is unrealistic to assume

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that all households in housing need will be provided with an affordable home. It is realistic to assume that the Private Rented Sector will continue to play an important role in meeting housing need in the short-to-medium term.

Impact of Welfare Reforms

7.76 The Coalition Government has heralded a period of considerable change by way of welfare reforms which will have an effect on local residents. The reforms are set against a backdrop of government spending cuts, which has seen funding levels drop, and an economic recession which has led to changes to the country’s housing market and how housing can be accessed. A summary of the welfare reforms and impacts are shown below:

 Reducing the Local Housing Allowance (LHA) from the median rent in a Broad Rental Market Area (BRMA) to the 30th centile and the abolition of the rate for 5 or more bedroom homes. These changes came in from April 2011 and will have meant some households seeing a reduction in housing benefit. There has also been a reduction in the number of homes available to rent at or below payment thresholds and potentially increased demand for lower cost properties. Households requiring larger (5 or more bedroom) homes have been disproportionately affected.

 Limiting payments for people under 35 to the shared room rate (up from 25) – from January 2012. This change has made it harder for Councils to place young single people in private rented accommodation and has seen a greater demand for shared housing.

 Up rating LHA in line with Consumer Price Index (CPI) instead of by reference to local rents. If rents increase at a rate above CPI then there will be a reduction in the number of properties with a rent below LHA maximum levels.

 Limiting Housing Benefit entitlements for working age people in social housing sector to reflect family size. The under occupancy penalty or ‘bedroom tax’ to remove what the Government considers was a spare room subsidy for social housing tenants is arguably the most controversial of the welfare reforms with households losing 14% of housing benefit if they have one spare bedroom and 25% for two or more. This change has already put considerable pressure on housing providers who are seeing a significantly increased demand for smaller (particularly one bedroom) homes. In the longer-term if the supply does not improve this change could see some increases in homelessness. This change was brought in from April 2013.

 A household benefit cap is being phased in from April 2013 which will limit the amount claimed in all benefits for working age (non-working) households to £500 per week for households with two or more people and £350 for single adults. For many households this will not make a difference to their ability to access housing; however larger households living in larger (more expensive) homes will be disproportionately affected.

 The move towards a Universal Credit is likely to end Housing Benefit payments direct to landlords, making benefit claimants potentially less attractive as tenants.

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7.77 Whilst the full impact of the various current and proposed changes is difficult to quantify it is clear when taken together that a significant number of people and households will be affected. Given the levels of housing need identified set against the potential supply of affordable housing (from both the existing stock and new provision) it seems unlikely that the number of households in need will fall in the short/medium-term. Indeed the evidence suggests a likely growth in demand – particularly for private rented accommodation.

Need for Different Types of Affordable Housing

7.78 Having studied housing costs, incomes and housing need the next step is to make an estimate of the proportion of affordable housing need that should be met through provision of different housing products. We therefore use the income information presented earlier in this section to estimate the proportion of households who are likely to be able to afford intermediate housing and the number for whom only social or affordable rented housing will be affordable. There are three main types of affordable housing that can be studied in this analysis:

 Intermediate (shared ownership/equity)  Affordable rent  Social rent

7.79 Whilst the process of separating households into different income bands for analytical purposes is quite straightforward, this does not necessarily tell us what sort of affordable housing they might be able to afford or occupy.

7.80 For example a household with an income close to being able to afford market housing might be able to afford intermediate or affordable rent but may be prevented from accessing certain intermediate products (such as shared ownership) as they have an insufficient savings to cover a deposit. Such a household might therefore be allocated to affordable rented or intermediate rented housing as the most suitable solution. However we would expect that few Registered Providers would build intermediate rented homes, given that the level of potential occupants for affordable rented homes is greater (as it includes households who could claim housing benefit to supplement their incomes).

7.81 The distinction between social and affordable rented housing is also complex. Whilst rents for affordable rented housing would be expected to be higher than social rents, this does not necessarily mean that such a product would be reserved for households with a higher income. In reality, as long as the rent to be paid falls at or below LHA limits then it will be accessible to a range of households (many of whom will need to claim housing benefit). Local authorities’ tenancy strategies might set policies regarding the types of households which might be allocated affordable rented homes; and many authorities will seek to avoid where possible households having to claim higher levels of housing benefit. This however needs to be set against other factors, including

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viability and the availability of grant funding. Over the current spending period to 2015 (and beyond this to 201845) grant funding is primarily available to support delivery of affordable rented homes. A significant level of affordable housing delivery is delivered through developer contributions (Section 106 Agreements).

7.82 For these reasons it is difficult to exactly pin down what proportion of additional affordable homes should be provided through different affordable tenure categories. In effect there is a degree of overlap between different affordable housing tenures, as the figure below shows.

Figure 39: Overlap between Affordable Housing Tenures

7.83 Given this overlap, for analytical purposes we have defined the following categories:

 Households who can afford 80% or more of market rent levels;  Households who afford no more than existing social rent levels (or would require housing benefit, or an increased level of housing benefit to do so);  Households which fall in between these parameters, who would potentially be able to afford more than existing social rent levels but could not afford 80% of market rents.

7.84 Table 44 below shows the proportion of households who fall into these broad income categories (based on analysis of the distribution of household incomes). Overall, around a sixth can afford 80% or more of market rent levels with only around 5% of households being in the band between social rents and 80% of market rents. This reflects the fact that there is relatively little difference in the housing costs for these two types of ‘product’.

45 See HCA (Jan 2014) National Affordable Housing Programme 2015-18, Prospectus

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Table 44: Proportion of Households who Cannot afford Market Housing by Income Category Area Can afford 80%+ Can afford between Can only afford at Market Rents Social and 80% Market Social Rent or Below Rents Cowes 19.3% 6.0% 74.7% East Cowes 16.0% 5.1% 78.9% Wootton 19.8% 6.2% 74.1% Ryde 16.2% 5.1% 78.7% East Wight 18.3% 5.8% 75.9% Rural East Wight 18.6% 5.9% 75.6% The Bay 15.7% 5.0% 79.4% Ventnor 14.9% 4.9% 80.1% Rural West Wight 19.3% 6.2% 74.5% Newport 17.5% 5.6% 77.0% West Wight 16.0% 5.2% 78.8% Island-wide 17.1% 5.4% 77.5% Source: Housing Needs Analysis

7.85 We do not have detailed information on households’ savings. We have assumed that around half of households with an income which would allow them to afford 80% or more of market rents would represent the potential market for equity-based intermediate products such as shared ownership and shared equity homes.

7.86 Taking the gross numbers for housing need and comparing this against the supply from relets of existing stock, the following net need arises within the different categories. The analysis does not make any allowance for current affordable housing being re-let at affordable rent levels. Where Registered Providers to re-let housing at affordable rent levels this would have some impact on the net need figures within different tenure categories. Neither does it take account of affordable housing in the development pipeline.

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Table 45: Net Affordable Need within Different Affordability Categories Estimated net need for Equity- Net Need from Households Net Need from Households based Products which could afford more than who cannot afford over existing Social Rents without existing Social Rent Levels Benefits but not Equity Products Need Supply Net Need Supply Net Need Supply Net need need need Cowes 7 1 7 12 0 12 55 30 25 East Cowes 4 1 3 7 0 7 42 36 6 Wootton 2 2 0 4 0 4 17 9 7 Ryde 12 1 10 19 0 19 114 78 35 East Wight 3 1 3 5 0 5 27 19 8 Rural East Wight 4 0 4 7 0 7 35 27 8 The Bay 10 3 6 16 0 16 96 70 26 Ventnor 3 0 2 5 0 5 30 24 6 Rural West Wight 4 0 3 6 0 6 28 25 4 Newport 14 2 12 23 0 23 123 109 14 West Wight 3 1 3 6 0 6 33 29 4 Island-wide 66 13 53 108 0 108 600 457 143 Source: Housing Needs Analysis

7.87 This data can also be taken forward to provide an estimate of the proportionate need for different types of housing in each area. It should be noted that the data has been rounded to the nearest whole number so the percentages may not exactly match the figures in the table above (the need for equity-based intermediate housing in Wootton is a good example of this where the analysis above shows a ‘0’ need although from the more detailed data this is actually estimated at 1.9%).

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Table 46: Net Need in Different Affordability Categories (Percentages)

Area Estimated net need for Net Need from Households Net Need from Households Equity-based Products which could afford more who cannot afford over than existing Social Rents existing Social Rent Levels without Benefits but not Equity Products Cowes 15.0% 26.6% 58.5% East Cowes 18.2% 44.9% 36.8% Wootton 1.9% 32.2% 65.9% Ryde 16.1% 29.4% 54.6% East Wight 16.3% 33.3% 50.4% Rural East Wight 21.0% 37.4% 41.6% The Bay 13.2% 32.5% 54.3% Ventnor 19.0% 36.0% 45.0% Rural West Wight 25.2% 46.3% 28.5% Newport 24.6% 46.2% 29.2% West Wight 22.8% 46.0% 31.2% Island-wide 17.5% 35.4% 47.0% Source: Housing Needs Analysis

7.88 In determining policies for affordable housing provision on individual sites, the analysis in the table above should be brought together with other local evidence such as from the Housing Register or parish surveys where available. Consideration could also be given to areas with high concentrations of social rented housing where additional intermediate housing might be desirable to improve the housing mix and to create ‘housing pathways’.

Key Findings

7.89 An assessment of housing need has been undertaken which is compliant with Government guidance to identify whether there is a shortfall or surplus of affordable housing on the Isle of Wight. This has estimated current housing need of 970 households, excluding existing social housing tenants where they would release a home for another household in need.

7.90 The housing needs model then looked at the balance between needs arising and the supply of affordable housing each year up to 2036. Over this period an estimated 735 households are expected to fall into housing need and 469 properties are expected to come up for relet each year.

7.91 Overall a net deficit of 7,611 affordable homes is identified to 2036 (304 per annum). This falls to an average of 284 affordable homes per annum if affordable housing with planning consent is included in the calculation of supply. Either way, is thus a significant requirement for new affordable housing in the study area and the Council is justified in seeking to secure additional affordable housing.

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7.92 Within the affordable housing need the analysis identifies a requirement for around a sixth of homes to be intermediate housing (18%) and five-sixths being social/affordable rented (82%).

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8 REQUIREMENTS FOR DIFFERENT SIZES AND TYPES OF HOMES

Introduction

8.1 As discussed in Section 5, there are a range of factors which influence the need for market and affordable housing. These factors play out at different spatial scales and influence both the level of housing need (in terms of aggregate household growth) and the nature of demand for different types, tenures and sizes of homes.

8.2 Key factors which are likely to influence demand for different types of homes include:

 The size and composition of households;  What sizes of home different households can afford to rent or buy;  Long-term demographic trends, including a growing older population;  Government interventions, such as the Help-to-Buy scheme and benefit reforms.

8.3 Demographic changes are however expected to be a key long-term driver. It is reasonable to consider the implications of demographic trends (and in particular changes in the age structure of the population) as a starting point for considering what mix of housing might be needed over the period to 2036.

8.4 The analysis in this section thus considers in some detail the implications of demographic drivers on demand for different sizes of homes. This is then brought together with an understanding of existing imbalances in the housing offer (drawing on the analysis in Section 3) to consider the mix of housing needed moving forwards. The analysis also considers the mix of affordable housing needed through assessment of both what households can afford and the stock and turnover of different types of affordable homes.

Housing Market Model: Modelling Methodology

8.5 The analysis of need for different sizes of homes in this section seeks to use the information available about the size and structure of the population and household structures; and consider what impact this may have on the sizes of housing required in the future. We have based the modelling on the main demographic projection with midpoint headship assumptions – this projection suggests a need for 14,735 additional homes from 2011 to 2036 (589 per annum).

8.6 Figure 40 below describes the broad methodology employed in the housing market modelling. Data is drawn from a range of sources including the 2011 Census and our demographic projections.

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Figure 40: Approach to Housing Market Modelling

Establish how households of different ages occupy homes (by tenure)

Project how the profile of households of different ages will change in future

Draw together housing needs, viability and funding issues to consider affordable housing delivery

Model future requirements for market and affordable housing by size and compare to existing profile of homes

Output recommendations for housing requirements by tenure and size of housing

Understanding how Households Occupy Homes

8.7 Whilst the demographic projections provide a good indication of how the population and household structure will develop it is not a simple task to convert the net increase in the number of households into a suggested profile for additional housing to be provided.

8.8 The main reason for this is that in the market sector households are able to buy or rent any size of property (subject to what they can afford) and therefore knowledge of the profile of households in an area does not directly translate into the sizes of property needed. The size of housing which households occupy in the market sector relates more to their wealth and age than the number of people which they contain. For example, there is no reason why a single person cannot buy (or choose to live in) a four bedroom home as long as they can afford it, and hence projecting an increase in single person households does not automatically translate in to a need for smaller units.

8.9 This issue is less relevant in the affordable sector, particularly since the introduction of the ‘bedroom tax’ which limits the level of housing benefit working-age households can claim based on the household size and structure as opposed to the size of the property. There will however still be some level of under-occupation moving forward with regard to older person households in particular; and working households who may be able to continue to under-occupy their current homes.

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8.10 The general methodology uses the information derived in the projections about the number of household reference persons (HRPs) in each age and sex group and applies this to the profile of housing within these groups. The data for this analysis has been formed from a commissioned table by ONS46 with data then calibrated to be consistent with 2011 Census data (e.g. about house sizes in different tenure groups and locations).

8.11 Figure 41 below shows an estimate of how the average number of bedrooms varies for different ages of HRP and different sexes by broad tenure group. In the market sector the average size of accommodation rises over time to typically reach a peak around the 40-49 age groups. In the affordable sector this peak appears earlier. After sizes peak, the average dwelling size decreases – possibly linked to some households down-sizing as they get older. It is also notable that the average size for affordable housing dwellings are lower than those for market housing whilst in market housing, male HRPs typically live in larger accommodation for all age groups (with no strong trend being seen in the affordable sector).

Figure 41: Average Bedrooms by Age, Sex and Tenure – Isle of Wight

3.5

3.0

2.5

2.0

1.5

1.0 Male - market Female - market Averagenumber of bedrooms Male - affordable 0.5 Female - affordable 0.0

85 + 25 - 29 30 - 34 35 - 39 40 - 44 45 - 49 50 - 54 55 - 59 60 - 64 65 - 69 70 - 74 75 - 79 80 - 84 Under 25 Age band

Source: Derived from ONS Commissioned Table C1213 and 2011 Census

Establishing a Baseline Position

8.12 Census 2011 estimated that there were 61,109 households living on the Island. Analysis of Census data linked to the demographic baseline provides us with an estimate of the profile of the housing stock in 2011, as shown in the table below. The table shows that an estimated 11% of households

46 Table C1213 which provides relevant data for all local authorities in England

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live in affordable housing with 89% being in the market sector. The size of the affordable sector has been fixed by reference to an estimate of the number of occupied social rented and shared ownership homes in 2011. The data also suggests that homes in the market sector are generally bigger than in the affordable sector with 59% having three or more bedrooms compared to 33% for affordable housing.

8.13 These figures are for households rather than dwellings as information regarding the sizes of vacant homes across the whole stock (i.e. market and affordable) is not readily available. For the purposes of analysis this will not make any notable difference to the modelled outputs. We have however translated the household projections into dwelling figures by including a vacancy allowance to provide the outputs of the market modelling.

Table 47: Estimated Profile of Dwellings in 2011 by Size Market Affordable Total Size of housing Number % Number % Number % 1 bedroom 4,455 8.2% 2,037 29.6% 6,492 10.6% 2 bedrooms 17,774 32.8% 2,550 37.0% 20,324 33.3% 3 bedrooms 22,408 41.3% 2,084 30.3% 24,492 40.1% 4+ bedrooms 9,587 17.7% 214 3.1% 9,800 16.0% Total 54,224 100.0% 6,885 100.0% 61,109 100.0% % in tenure 88.7% 11.3% 100.0% Source: Derived from 2011 Census

Tenure Assumptions

8.14 The housing market model has been used to estimate future requirements for different sizes of property over the next 25-years. The model works by looking at the types and sizes of accommodation occupied by different ages of residents, and attaching projected changes in the population to this to project need and demand for different sizes of homes. However the way households of different ages occupy homes differs between the market and affordable sectors (as shown earlier). Thus it is necessary to consider the future balance between provision of market and affordable housing.

8.15 The analysis in Section 5 indicated that a significant proportion of the identified need in the main demographic projection is for affordable housing. However it is unlikely that all sites will deliver affordable housing, and thus reasonable to expect that supply will fall modestly below this level. Historically around 21% of net completions have been of affordable housing (looking at the 2006-12 period or the 2002-12 decade). The Council current policy seeks 35% affordable housing on sites of over 15 dwellings in the main towns and 10 dwellings in rural areas on private-led development schemes. In addition we would expect some delivery on sites owned by Registered Providers. It is

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necessary for modelling purposes to make a high-level assumption on what proportion of housing overall might be delivered as affordable housing. On the basis of the above, we have modelled that 30% of additional homes delivered will be of affordable housing. This is not intended to undermine or prejudge the Council’s policy position. We would note that a higher affordable housing target than this would be necessary to deliver this level of provision, given that some sites will fall under thresholds at which affordable housing is sought; and that some schemes may deliver a lower level taking account of the scheme-specific economics of development.

Model Outputs: Affordable Housing

8.16 Figure 42 and Table 48 below show estimates of the sizes of affordable housing required for the HMA based on our understanding of demographic trends. The data suggests in the period between 2011 and 2036 that around 77% of the net need is for homes with one- or two-bedrooms with around 23% of the need being for larger homes with three or more bedrooms.

Table 48: Modelled Size of Dwellings Needed for the HMA 2011 to 2036 – Affordable Housing Size 2011 2036 Additional % of additional households 2011- households 2036 1 bedroom 2,037 3,580 1,543 37.6% 2 bedrooms 2,550 4,163 1,613 39.3% 3 bedrooms 2,084 2,951 867 21.1% 4+ bedrooms 214 291 77 1.9% Total 6,885 10,986 4,101 100.0% Source: Housing Market Model

8.17 This analysis provides a longer-term view of requirements for affordable housing, based on demographic trends, and does not reflect any specific priorities such as for family households in need rather than single people. This is relevant in considering how the modelled outputs might be translated into policies for affordable housing mix.

8.18 A further issue to consider in this respect is policies for one-bed properties. On the one hand one- bed properties offer limited flexibility to accommodate households’ changing requirements. On the other hand the ‘bedroom tax’ may increase need for one-bed properties (and smaller homes more generally) ‘on the ground’ from working-age households.

8.19 Delivery of larger homes (such as those with 3 or more bedrooms) can be beneficial in not just meeting the needs of households with an acute housing need, but also in releasing smaller properties to meet the needs of other households. Additionally, the supply of four bedroom accommodation to rent in the private rented sector is limited (particularly dwellings where LHA can

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be claimed) and so additional provision of larger homes over and above the figure suggested in the modelling may be prudent – such a need can be evidenced at a more local level through reference to sources such as the Housing Register or Parish surveys.

8.20 Figure 42 below shows how our estimated affordable requirement compares with the stock of affordable housing in 2011. The figures are based on households (i.e. before adding in a vacancy allowance). The data shows that relative to the current stock there is a slight shift of the net need towards smaller homes. This reflects demographic changes: in the future household sizes are expected to drop whilst the population of older people will increase. Older person households (as shown earlier) are more likely to occupy smaller dwellings. However, the analysis still identifies a need for additional larger units (particularly three bedroom accommodation).

Figure 42: Impact of Demographic Trends on Affordable Housing Need by House Size, 2011 to 2036 – Isle of Wight

4,500 4,000 3,500 1,613 3,000 2036 1,543 2011 2,500 867 2,000 1,500 2,550

1,000 2,037 2,084 Numberof households group in 500 77 0 214 1 bedroom 2 bedrooms 3 bedrooms 4+ bedrooms

Source: Housing Market Model

Model Outputs: Market Housing

8.21 As we have previously identified there are a range of factors which can be expected to influence demand for housing. The modelling specifically looks at the implications of demographic drivers. It uses a demographic-driven approach to quantify demand for different sizes of properties over the 25-year period from 2011 to 2036. This provides a starting point for considering future housing mix.

8.22 The table below shows estimates of the sizes of market housing needed from 2011 to 2036 based on demographic trends for the Island. The majority of market demand is expected to be for two- and three-bed homes.

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Table 49: Modelled Sizes of Dwellings Needed 2011 to 2036 – Market Housing Size 2011 2036 Additional % of additional households 2011- households 2036 1 bedroom 4,455 5,216 761 8.0% 2 bedrooms 17,774 21,998 4,224 44.1% 3 bedrooms 22,408 26,165 3,756 39.3% 4+ bedrooms 9,587 10,414 828 8.6% Total 54,224 63,793 9,568 100.0% Source: Housing Market Model

8.23 Figure 43 below shows how our estimated market requirement compares with the current stock of housing (based on households (i.e. excluding the vacancy allowance)). The data again suggests that there is expected to be slight shift of market demand towards smaller dwellings relative to the distribution of existing housing. This is understandable given the fact that household sizes are projected to fall slightly in the future (particularly due to the ageing of the population).

Figure 43: Impact of Demographic Trends on Market Housing Need by House Size, 2011 to 2036 – Isle of Wight

30,000

25,000 2036 3,756 2011 20,000 4,224

15,000

22,408 10,000 828 17,774

Numberof households group in 5,000 761 9,587 4,455 0 1 bedroom 2 bedrooms 3 bedrooms 4+ bedrooms

Source: Housing Market Model

8.24 The graphs and statistics are based upon our modelling of demographic trends. As we have identified, it should be recognised that a range of factors including affordability pressures and market signals will continue to be important in understanding market demand. At a local level, market demand will be influenced by the characteristics of the site and quality of place. It can also change over time, linked to wider market trends and levels of development of particular products within the local market.

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8.25 In determining policies for housing mix, policy aspirations are also relevant. These may include aspirations to focus the mix more towards meeting local (rather than in-migrant) demand in some areas; or to diversify the housing mix and attract higher skilled workers in others.

8.26 As the last few years have shown, there are a range of inter-dependencies which affect housing demand, with for instance effective demand for entry-level market housing having been restricted over the last few years by the availability of mortgage finance for first-time buyers and those on lower earnings. An improving economic outlook, increased range of mortgage deals and the Government’s Help-to-Buy scheme are now however starting to see the situation change.

Market and Affordable Housing

8.27 The table and figure below summarises the modelled outputs for housing need in both the market and affordable sectors. This includes a vacancy allowance in moving from household figures to estimates of housing requirements.

Table 50: Demographically-Driven Need for Different Sizes of Homes, 2011 to 2036 Number of Market Affordable bedrooms % of Market % of Market Affordable Dwellings Dwellings Affordable Households dwellings Households dwellings 1 bedroom 761 820 8.0% 1,543 1,664 37.6% 2 bedrooms 4,224 4,553 44.1% 1,613 1,739 39.3% 3 bedrooms 3,756 4,049 39.3% 867 935 21.1% 4+ bedrooms 828 892 8.6% 77 83 1.9% Total 9,568 10,315 100.0% 4,101 4,421 100.0% Source: Housing Market Model

8.28 We have identified a range of factors above which are relevant in considering the future mix of housing. It is not the role of the SHMA to set policies for housing mix, however it is useful for it to provide some guidance on mix drawing together the demographic modelling with consideration of the wider factors listed. This is considered below.

Guidance on Affordable Housing Size Mix

8.29 In the affordable sector where there are typically issues around the demand for and turnover of one bedroom homes. We also need to consider that the stock of four bedroom affordable housing is very limited and tends to have a very low turnover. As a result, whilst the number of households coming forward for four or more bedroom homes is typically quite small the ability for these needs to be met is even more limited.

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8.30 It should also be recognised that local authorities have statutory homeless responsibilities towards families with children and would therefore often prioritise the needs of families over single person households and couples. On this basis the profile of affordable housing to be provided would be further weighted to two or more bedroom housing. In the short-term however there may be a need to continue to provide one-bedroom homes due to the ‘bedroom tax’.

8.31 For these reasons we would suggest in converting modelled outputs into a profile of housing to be provided (in the affordable sector), looking over the longer-term to 2036, that the proportion of one bedroom homes required is reduced slightly from these outputs with a commensurate increase in four or more bedroom homes also being appropriate.

8.32 At an Island-wide level, the analysis would support the mix of affordable housing in new developments of:

 1-bed properties: 30%-35%  2-bed properties: 35%40%  3-bed properties: 20%-25%  4+ bed properties: 5%-10%

8.33 Our strategic conclusions recognise the role which delivery of larger family homes can play in releasing supply of smaller properties for other households; together with the limited flexibility which one-bed properties offer to changing household circumstances which feed through into higher turnover and management issues.

Guidance on Market Housing Size Mix

8.34 We have sought to draw together the market modelling with the wider analysis in the report to provide similar strategic guidance on the mix of housing which might be appropriate in the market sector. We consider that the following strategic mix of market housing would be reasonable.

 1-bed properties: 5%-10%  2-bed properties: 45%  3-bed properties: 40%  4-bed properties: 5%-10%

8.35 The figures can be used to inform policies regarding housing mix and as a monitoring tool to ensure that future delivery is not unbalanced. They are not however intended to be prescriptively applied to every site.

Housing Market Modelling Outputs for Sub-Markets

8.36 Whilst the analysis above has focussed on outputs for the Island as a whole, the data itself has been built up from analysis at a smaller area level. The tables below provide the outputs of this analysis in terms of the sizes of accommodation estimated to be required in each of the affordable and market sectors for the eleven different areas.

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8.37 To a considerable degree the outputs show a reinforcing of the current housing offer in each area with larger homes expected to be required in areas which traditionally have provided larger housing units. This is largely a function of the expected demographic change in these areas and the fact that household types requiring larger homes are expected to continue seeking these locations. However, as the demographic change is somewhat linked to past trends, the suppression of a particular type of household in the past may lead to the size needs of such households being masked in future projections.

Table 51: Settlement Level Estimates of Dwelling Sizes (2011-36): Future Market Housing Sub-area 1 bedroom 2 bedrooms 3 bedrooms 4+ bedrooms Cowes 5.4% 43.5% 43.6% 7.5% East Cowes 6.1% 45.6% 41.6% 6.7% Wootton 7.1% 38.6% 42.7% 11.7% Ryde 15.4% 48.0% 31.7% 4.8% East Wight 4.8% 40.2% 41.6% 13.4% Rural East Wight 3.8% 39.4% 46.7% 10.1% The Bay 11.3% 49.8% 31.6% 7.2% Ventnor 10.6% 49.0% 33.5% 7.0% Rural West Wight 3.6% 37.5% 45.5% 13.4% Newport 7.8% 44.0% 42.0% 6.3% West Wight 6.5% 44.0% 39.9% 9.7% Isle of Wight 8.0% 44.1% 39.3% 8.6% Source: Housing Market Model

Table 52: Settlement Level Estimates of Dwelling Sizes (2011-36): Future Affordable Housing Sub-area 1 bedroom 2 bedrooms 3 bedrooms 4+ bedrooms

Cowes 40.7% 28.4% 28.0% 2.9% East Cowes 37.2% 34.1% 26.3% 2.3% Wootton 23.8% 65.5% 9.5% 1.2% Ryde 41.9% 38.3% 17.8% 2.0% East Wight 31.4% 47.6% 19.9% 1.1% Rural East Wight 32.7% 31.2% 34.9% 1.2% The Bay 42.3% 34.0% 21.3% 2.4% Ventnor 51.6% 33.8% 13.7% 0.9% Rural West Wight 23.4% 49.6% 24.5% 2.5% Newport 44.5% 35.2% 18.1% 2.1% West Wight 36.0% 45.0% 18.2% 0.9% Isle of Wight 37.6% 39.3% 21.1% 1.9% Source: Housing Market Model

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Summary of Key Findings

8.38 There are a range of factors which will influence demand for different sizes of homes, including demographic changes; future growth in real earnings and households’ ability to save; economic performance and housing affordability. Our analysis linked to long-term (25-year) demographic change concludes that the following represents an appropriate mix of affordable and market homes:

Table 53: Indicative Need for Different Sizes of Homes (2011-36) 1-bed 2-bed 3-bed 4+ bed Market 5-10% 45% 40% 5-10% Affordable 30-35% 35-40% 20-25% 5-10%

8.39 The mix identified above should inform Island-wide policies. In applying these to individual development sites regard should be had to the nature of the development site and character of the area, and to up-to-date evidence of need as well as the existing mix and turnover of properties at the local level.

8.40 Based on the evidence, we would expect the focus of new market housing provision to be on two and three-bed properties. Continued demand for family housing can be expected from newly forming households. There may also be some demand for medium-sized properties (2- and 3- beds) from older households downsizing and looking to release equity in existing homes, but still retain flexibility for friends and family to come and stay.

8.41 The analysis of an appropriate mix of dwellings should also inform the ‘portfolio’ of sites which are considered through the Local Plan process, including: Site Allocations, Neighbourhood Plans and other planning documents. Equally it will be of relevance to affordable housing negotiations.

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9 HOUSING NEEDS OF SPECIFIC GROUPS IN THE POPULATION

Introduction

9.1 We have established overall housing requirements for different sizes of properties over the next 25- years, however there can be specific groups within the population who require specialist housing solutions or for whom housing needs may differ from the wider population. These groups are considered within this section.

9.2 Estimates of household groups who have particular housing needs is a key output of the SHMA Guidance whilst the National Planning Policy Framework identifies that local planning authorities should plan for a mix of housing which takes account of the needs of different groups in the community.

9.3 The following key groups have been identified which may have housing needs which differ from those of the wider population:

 Older Persons;  People with disabilities;  BME groups  Households with children;  Young people;  Self- or Custom-build.

Housing Needs of Older People

9.4 The SHMA Guidance recognises the need to provide housing for older people as part of achieving a good mix of housing. A key driver of change in the housing market over the next 20-25 years is expected to be the growth in the population of older persons.

9.5 Indeed as population projections show, the number of older people is expected to increase significantly over the next few years. In this section we draw on a range of sources including our population projections and data from POPPI (Projecting Older People Population Information) to consider the housing needs of older people.

9.6 Population changes, including improvements in life expectancy are expected to have a big impact on housing needs. Demographics are the key driver of issues associated with housing older people.

9.7 Many older people will want to live in the existing (and often family) homes – the homes which they have lived in for, in some cases, many years. Some may need adaptions to properties, or floating support, to reflect their changing needs as they get older.

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9.8 Some older households may consider downsizing, such as to reduce housing costs, release equity from their homes to fund their lifestyle or retirement, or to meet their changing needs (such as a move to single storey properties to manage increasing mobility problems). Targeted new housing supply can help to facilitate this.

9.9 Some households may require specialist accommodation or homes with an element of care or support – particularly those in the oldest age groups. However there is evidence nationally of falling demand for residential care in some areas, and a rapidly rising average age of people living in sheltered housing over the last 20 years, with those households in sheltered housing requiring higher levels of support. Many local authorities have struggled to contain expenditure on services for older people.

9.10 Against this context new models of enhanced and extra care housing have emerged. These aim to meet the needs of those who require high levels of care and support alongside those who are still generally able to care for themselves. These models often allow for changing circumstances in situ rather than requiring a move. There has also been a growth in market demand for housing for older people, with a number of providers providing ‘retirement living’ homes (often for over 55s) ranging in scale from individual development schemes with 10 or 20 homes through to ‘retirement villages.’

9.11 Fundamentally there is a need to provide housing for older people as part of achieving a good mix of housing, but recognising that many older people are able to exercise choice and control over housing options. Providing choice, including supporting people to stay in their own homes through supporting adaptations to properties and through provision of floating support, will be important.

Current Population of Older Persons

9.12 The table below analyses baseline population data about older persons. The data has been taken from the published 2011 ONS Mid-Year Population Estimates and is provided for age groups from 55 and upwards. In reality, those aged 55 might not be considered as ‘old’ but we have started the analysis from this age group as some housing developments are specifically targeted at the over 55 age group.

9.13 When compared with either the South East or the whole of England, the Island has a significantly higher proportion of older persons. In 2011 it is estimated that 39% of the population of the Island was aged 55 or over with 24% aged 65 and over.

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Table 54: Older Person Population (2011) 1.1. Age group Isle of Wight South East England Population % of popn % of popn % of popn Under 55 85,045 61.5% 70.0% 72.0% 55-64 20,102 14.5% 12.3% 11.6% 65-74 17,321 12.5% 9.3% 8.6% 75-84 10,817 7.8% 6.0% 5.5% 85+ 5,107 3.7% 2.4% 2.2% Total 138,392 100.0% 100.0% 100.0% Total 55+ 53,347 38.5% 30.0% 28.0% Source: ONS 2011 Mid-Year Population Estimates

Future Changes in the Population of Older Persons

9.14 We can use population projections to provide an indication of how the numbers of older persons might change over the period to 2036. The data provided below is based on our main demographic trend-based projection.

9.15 The data shows that the Island is expected to see a substantial increase in the older person population with the total number of people aged 55 and over expected to increase by 40% over just 25-years. We are also expected to see significant population growth in the oldest age groups (linked to improvements to life expectancy) with the population aged 85 and over expected to increase by 154% over the next 25-years.

Table 55: Projected Change in Population of Older Persons (2011 to 2036) Population Population Change from % change Age group (2011) (2036) 2011 from 2011 Under 55 85,045 82,285 -2,760 -3.2% 55-64 20,102 19,590 -512 -2.5% 65-74 17,321 24,592 7,271 42.0% 75-84 10,817 17,746 6,929 64.1% 85+ 5,107 12,965 7,858 153.9% Total 138,392 157,178 18,786 13.6% Total 55+ 53,347 74,892 21,545 40.4% Source: SHMA Population Projections

Characteristics of Older Persons Households

9.16 The table below shows data from the 2011 Census about the number of pensioner households (defined as people aged 65 and over regardless of sex) compared with other areas. Around 28% of households in 2011 were comprised entirely of pensioners. This is notably higher than the regional and national average. Of the total number of pensioner households, some 58% are single person households.

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Table 56: Pensioner Households (Census 2011) Pensioner households Isle of Wight South East England

Single pensioner 10,055 449,969 2,725,596 2 or more pensioners 7,229 329,263 1,851,180 All households 61,085 3,555,463 22,063,368 Single pensioner 16.5% 12.7% 12.4% 2 or more pensioners 11.8% 9.3% 8.4% All households 100.0% 100.0% 100.0% Total % pensioner only 28.3% 21.9% 20.7% Source: Census (2011)

9.17 The figure below shows the tenure of older person households. The data has been split between single pensioner households and those with two or more pensioners (which will largely be couples). Pensioner households are relatively likely to live in owner-occupied accommodation (83%) and particularly less likely than other households to be in the private rented sector. The proportion of pensioner households living in the private rented sector is 6% compared with 17% of all households on the Island.

9.18 There are however notable differences for different types of pensioner households; with single pensioners having a lower level of owner-occupation than larger pensioner households. Single pensioner households also have a much higher proportion living in the social rented sector (and relatively more in private rented accommodation).

Figure 44: Tenure of Older Person Households – Isle of Wight

100% 2.4% 3.5%0.6% 1.7% 1.0% 1.2% 8.1% 4.1% 6.2% 90% 17.4% 8.7% 8.9% 21.8% 12.4% 80% 7.7% 10.7% 7.0% 70% 11.4%

60% 29.6% 50% 38.2% 83.1% 40% 75.5% 70.1%

%of households group in 30%

20% 41.1% 27.5% 10%

0% Single pensioner 2 or more pensioners All pensioner only All other households All households Owner-occupied (no mortgage) Owner-occupied (with mortgage) Social rented Private rented Other

Source: 2011 Census

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9.19 A key theme that is often brought out in Housing Market Assessment work is the large proportion of older person households who under-occupy their dwellings. Data from the Census allows us to investigate this using the bedroom standard. The Census data suggests that older person households are more likely to under-occupy their housing than other households. In total 48% of older person households have an occupancy rating of +2 or more (meaning there are at least two more bedrooms than are technically required by the household). This compares with 30% for non- pensioner households. To some extent this is a reflection of the level of equity which older households have built up in their homes. Further analysis suggests that under-occupancy is far more common in households with two or more pensioners than single pensioner households.

Figure 45: Occupancy rating of Older Person Households – Isle of Wight

100% 0.2% 4.5%0.0% 0.1% 3.6% 2.7% 12.6% 90% 18.2% 24.8% 80% 29.5% 36.2% 70% 39.6% 60% 41.9% 37.7% 50% 36.9% 40%

%of households group in 30% 59.3% 47.7% 20% 39.7% 34.8% 29.9% 10%

0% Single pensioner 2 or more pensioners All pensioner only All other households All households +2 or more +1 0 -1 or less

Source: 2011 Census

9.20 It is of interest to study the above information by tenure. The table below shows the number of pensioner households who had an occupancy rating of +2 or more in each of three broad tenure groups in 2011. Whilst the majority of older person households with an occupancy rating of +2 or more were in the owner-occupied sector, there were around 200 properties in the social rented sector occupied by pensioner only households with an occupancy rating of +2 or more. This may therefore present some opportunity to reduce under-occupation; although to achieve this it may be necessary to provide housing in areas where households currently live and where they have social and community ties.

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Table 57: Pensioner Households with Occupancy Rating of +2 or more by Tenure Tenure 2 or more All pensioner only Single pensioner pensioners households Owner-occupied 3,650 3,964 7,614 Social rented 133 63 196 Private rented 204 91 295 All tenures 3,987 4,118 8,105 Source: 2011 Census

9.21 It should however be recognised that many older households in owner occupation will have built up equity in their existing homes. In the private sector many older households may be able to afford a larger home than they need (and thus under-occupy housing). Some may look to downsize to release equity from homes to support their retirement (or may move away from the area); however we would expect many older households to want to retain family housing with space to allow friends and relatives to come to stay.

Health-related Population Projections

9.22 In addition to providing projections about how the number and proportion of older people is expected to change in the future we can look at the likely impact on the number of people with specific illnesses or disabilities. For this we have used data from the Projecting Older People Information System (POPPI) website which provides prevalence rates for different disabilities by age and sex. For the purposes of the SHMA, analysis has focussed on estimates of the number of people with dementia and mobility problems.

9.23 For both of the health issues analysed the figures relate to the population aged 65 and over. The figures from POPPI are based on prevalence rates from a range of different sources and whilst these might change in the future (e.g. as general health of the older person population improves) the estimates are likely to be of the right order.

9.24 The table below shows that both of the illnesses/disabilities are expected to increase significantly in the future although this would be expected given the increasing older population. In particular there is projected to be a large rise in the number of people with dementia (up 123%) along with an 88% increase in the number with mobility problems.

Table 58: Estimated Population Change for range of Health Issues (2011 to 2036) Type of illness/disability 2011 2036 Change % increase Dementia 2,322 5,169 2,847 122.6% Mobility problems 6,302 11,847 5,545 88.0% Source: Data from POPPI and SHMA Demographic Projections

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Indicative Need for Specialist Housing

9.25 Given the ageing population and higher levels of disability and health problems amongst older people there is likely to be an increased requirement for specialist housing options moving forward. Such housing can broadly be split into three categories; sheltered, extra-care and residential care. Over the past few years there has generally been a move away from providing sheltered and residential care housing towards extra-care housing (ECH). We would consider moving forward that the majority of additional specialist housing moving forward is likely to be of ECH. On the Island there is currently a significant supply of sheltered housing (mostly in the affordable sector) whilst it is likely that a proportion of new admissions to residential care will be diverted to ECH.

9.26 Hence the analysis that follows is designed to estimate requirements for ECH moving forward. It inherently assumes that there is no requirement for increases in the stock of other types of specialist housing. The methodology employed uses prevalence rates to estimate the number of people requiring ECH. In addition, assumptions have been made about the proportion of this that should be in each of the social/affordable and market sectors (including shared ownership). This recognises that a large proportion of older persons are owner-occupiers who will be able to access specialist market housing given the levels of equity built up in their existing homes. The key assumptions are:

 125 people per 1,000 population aged 75 and over will require ECH; and  A tenure split of 25% social/affordable housing and 75% market (including shared ownership).

9.27 This methodology is broadly consistent with that utilised in other areas and also in line with that used on the Housing Learning and Improvement Network (Housing LIN) website (which is specifically set up to study older persons housing needs). The tenure split chosen is consistent with the split between outright owners and household in other tenures when studying pensioner only households.

9.28 Additionally, a vacancy allowance has been added to the derived household figures to make a dwelling estimate (this figure being consistent with that used in the main projections). Whilst we would consider the assumptions above to be sound, the outputs should be treated as indicative - in the longer-term changes to the age structure with more people in ‘older’ age groups (e.g. 85+, 90+) could see requirements increase.

9.29 The table below shows estimated levels of need for ECH by applying the above assumptions. The data is shown for the whole 25-year period from 2011 to 2036. The data shows a requirement for 1,848 units of ECH up to 2036 – equivalent to about 74 homes per annum.

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Table 59: Estimated Requirement for Specialist (Extra-Care) Housing (2011-36) 2011-36 Market 1,386 Affordable 462 Total 1,848 Per annum 74 This figure is included in overall housing requirement of 589.

9.30 We would recommend that the above figures are treated as indicative and the Council might want to consider further research to identify the types of market specialist housing best suited to meet the requirements of an ageing population.

9.31 Although the analysis in this section has been predicated on the possible requirement for Extra Care Housing with an assumption that there will be no increase in the levels of residential care it is worth briefly reflecting on possible changes in the amount of people living in care homes on the Island if trends shown in the demographic projections were to continue. This analysis suggests that the number of people aged 75 and over in this type of accommodation will increase by 92% (from 1,854 to 3,561) in the period from 2011 to 2036.

People with Disabilities

9.32 This section concentrates on the housing situation of people and households that contain someone with some form of disability. We have again drawn on 2011 Census data although at the time of writing the level of Census data available was quite limited. It should also be recognised that an analysis of people with disabilities is very strongly linked with the above analysis about older people.

9.33 The table below shows the proportion of people with a long-term health problem or disability (LTHPD) and the proportion of households where at least one person has a LTHPD. The data suggests that across the Island some 29% of households contain someone with a LTHPD. This figure is notably higher than the regional or national average. The figures for the population with a LTHPD again show a higher proportion than national/regional figures (an estimated 22.6% of the population of the Island have a LTHPD).

Table 60: Households and People with Long-Term Health Problem or Disability (2011) Households containing Population with health Area someone with health problem problem Number % Number % Isle of Wight 18,019 29.5% 31,246 22.6% South East 839,086 23.6% 1,356,204 15.7% England 5,659,606 25.7% 9,352,586 17.6% Source: Census (2011)

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9.34 It is likely that the age profile of the area will heavily impact upon the numbers of people with a LTHPD, as older people tend to be more likely to have a LTHPD. Therefore the figure below shows the age bands of people with a LTHPD. It is clear from this analysis that those people in the oldest age bands are more likely to have a LTHPD – for example some 81% of people aged 85 and over have a LTHPD. It should be noted that the base for the figure below is slightly different to the above table in that it excludes people living in communal establishments.

Figure 46: Population with LTHPD in each Age Band

Age 0 to 15 5.1%

Age 16 to 24 7.3%

Age 25 to 34 8.8%

Age 35 to 49 13.6%

Age 50 to 64 23.2%

Age 65 to 74 36.1%

Age 75 to 84 58.4%

Age 85 and over 81.3%

All ages 21.5%

0% 20% 40% 60% 80% 100% % with long-term health problem or disability

Source: Census (2011)

9.35 The age specific prevalence rates shown above can be applied to the demographic data to estimate the likely increase over time of the number of people with a LTHPD. In applying this information to our main demographic projections it is estimated that the number of people with a LTHPD will increase by around 12,600 (a 41% increase). All of this increase and more (104%) is expected to be in age groups aged 65 and over. The population increase of people with a LTHPD represents 67% of the total increase in the population projected by the demographic modelling.

The Adult Population with Disabilities

9.40 The tables below provide an indication of the size of the adult population with various disabilities and how this is expected to change over the period from 2012 to 2020 (which is the longest timeframe available from this source). The information is taken from the PANSI website and we have looked at learning disabilities, physical disabilities and mental health problems. The three tables show that there are expected to be only very moderate increases in the number of people with each of these disabilities (and some decreases) – these changes are fairly insignificant when

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compared with increases in health problems expected to be experienced as a result of the ageing population.

Table 61: Estimated Population Change in Population with Learning Disabilities

Age band 2012 2020 Change % Increase 18-24 266 235 -31 -11.7% 25-34 331 356 25 7.6% 25-44 392 365 -27 -6.9% 45-54 463 454 -9 -1.9% 55-64 439 486 47 10.7% Total 1,891 1,896 5 0.3% Source: PANSI Website

Table 62: Estimated Population Change in Population with moderate or serious Physical Disability

Age band 2012 2020 Change % Increase 18-24 402 357 -45 -11.2% 25-34 559 601 42 7.5% 25-44 896 829 -67 -7.5% 45-54 1,930 1,872 -58 -3.0% 55-64 2,891 3,189 298 10.3% Total 6,677 6,847 170 2.5% Source: PANSI Website

Table 63: Estimated Population Change in Population with Mental Health Problems (those aged 18-64)

Type of mental health problem 2012 2020 Change % Increase Common mental disorder 12,651 12,632 -19 -0.2% Borderline personality disorder 354 353 -1 -0.3% Antisocial personality disorder 272 272 0 0.0% Psychotic disorder 314 314 0 0.0% Two or more psychiatric disorders 5,647 5,640 -7 -0.1% Source: PANSI Website

BME Households

9.36 Black and Minority Ethnic (BME) households, as a group, are quite often found to have distinct characteristics in terms of their housing needs, or may be disadvantaged in some way.

9.37 From 2011 Census data we find that around 4.6% of the Island’s population came from a non-White (British/Irish) background. This figure is significantly below that found across either the region (14%) or England (19%). The key BME group on the Island is Other-White (which is likely to contain a number of Eastern European migrants) – the Other-White population makes up 1.9% of all people on the Island which is significantly higher than any other group.

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Table 64: Black and Minority Ethnic Population (2011)

Ethnic Group Isle of Wight South East England

White: British 94.8% 85.2% 79.8% White: Irish 0.5% 0.9% 1.0% White: Gypsy or Irish Traveller 0.1% 0.2% 0.1% White: Other White 1.9% 4.4% 4.6% Mixed: White and Black Caribbean 0.4% 0.5% 0.8% Mixed: White and Black African 0.1% 0.3% 0.3% Mixed: White and Asian 0.5% 0.7% 0.6% Mixed: Other Mixed 0.2% 0.5% 0.5% Asian: Indian 0.3% 1.8% 2.6% Asian: Pakistani 0.1% 1.1% 2.1% Asian: Bangladeshi 0.1% 0.3% 0.8% Asian: Chinese 0.2% 0.6% 0.7% Asian: Other Asian 0.5% 1.4% 1.5% Black: African 0.1% 1.0% 1.8% Black: Caribbean 0.1% 0.4% 1.1% Black: Other Black 0.0% 0.2% 0.5% Other ethnic group: Arab 0.0% 0.2% 0.4% Any other ethnic group 0.1% 0.4% 0.6% Total 100.0% 100.0% 100.0% Total population 138,265 8,634,750 53,012,456 % non-White (British/Irish) 4.6% 13.9% 19.3% Source: ONS (2011 Census)

9.38 Since 2001 the BME population on the Island can be seen to have increased significantly as shown in the figure below. The data shows that the overall population of the area has risen by about 5,500 over the 10-year period with the White: British/Irish population increasing by around 2,500 people. BME groups have therefore increased by over 3,000 people (an 89% increase). This particularly reflects differences in the age structure of the population in different ethnic groups (with younger populations likely to grow more strongly).

9.39 Looking at particular BME groups we see that the largest rise in terms of population has been for the White:Other population (which is likely to include growth in Eastern European migrant populations), closely followed by the population Mixed and Asian populations.

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Figure 47: Changes in the BME population 2001 to 2011 – Isle of Wight Ethnic Group 2001 2011 Change % change

White (British/Irish) 129,342 131,846 2,504 1.9% White - Other 1,640 2,699 1,059 64.6% Mixed 719 1,709 990 137.7% Asian or Asian British 555 1,514 959 172.8% Black or Black British 304 303 -1 -0.3% Chinese and other 171 194 23 13.5% Total 132,731 138,265 5,534 4.2% Source: Census 2001 and 2011

BME Household Characteristics

9.40 Census data can also be used to provide some broad information about the household and housing characteristics of the BME population on the Island. The figure below looks at the household composition of six broad groups using data from the 2011 Census.

9.41 The age profile of the BME population is striking when compared with White: British/Irish people (as shown in the figure below). All BME groups are considerably younger than the White (British/Irish) group with people from a Mixed background being particularly likely to be aged under 15 when compared with any other group. The proportions of older persons are also notable with 33% of White British/Irish population being age 60 or over, compared with 11% for all BME groups (combined). Because of their younger age structure, BME populations are thus more aligned to grow through natural change.

9.42 It should be noted that for some age groups the figures are slightly distorted by the population figures including those in institutional accommodation (including prisons). This has a particular impact on the numbers in the 30-44 and 45-59 age groups.

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Figure 48: Population Age Profile by Ethnic Group (2011)

White: British/Irish 14.7% 15.4% 16.2% 20.8% 20.9% 11.8%

White: Other 14.9% 18.5% 30.3% 18.3% 11.5% 6.4%

Mixed 47.2% 24.4% 13.3% 9.5% 3.8%1.8%

Asian 17.0% 21.5% 35.9% 18.9% 5.2%1.6%

Black 6.6% 20.5% 40.6% 23.4% 7.6%1.3%

Other 9.3% 22.2% 29.4% 24.7% 11.3% 3.1%

All population 15.1% 15.7% 16.8% 20.6% 20.3% 11.5%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Under 15 15-29 30-44 45-59 60-74 75 and over Source: Census (2011)

9.43 The figure below shows the tenure split of households in each of the six broad ethnic groups. The data shows that White (British/Irish) households are the most likely to be owner-occupiers with no mortgage (and owner-occupiers more generally), consistent with their older age structure. Mixed and Black households show high proportions living in social rented housing; whilst all BME groups are more likely than average to live in the private rented sector. Levels of outright ownership amongst BME households are generally low. This is likely to be partly a function of the younger age structures.

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Figure 49: Tenure by ethnic group – Isle of Wight

100% 2.8% 4.2% 4.5% 3.9% 4.3% 4.2% 90% 15.3% 22.2% 80% 33.8% 31.2% 31.5% 10.7% 40.0% 70% 8.3%

60% 5.8% 29.6% 14.8% 12.8% 50% 14.3% 33.3% 27.4% 40% 29.9% 32.6%

%of households group in 30% 30.0% 20% 41.6% 28.8% 31.9% 10% 19.6% 19.1% 11.4% 0% White White Other Mixed Asian Black Other British/Irish Owner-occupied (no mortgage) Owner-occupied (with mortgage) Social rented Private rented Other

Source: 2011 Census

9.44 The figure below shows ‘occupancy ratings’ by BME group. This is based on the bedroom standard where a positive figure indicates under-occupancy and negative figures suggest some degree of over-crowding. The data clearly shows that BME groups are more likely to be overcrowded (i.e. have a negative occupancy rating) than White (British/Irish) households. In particular, the Census data suggests that 11% of Asian 9% of Black households are overcrowded - this compares with only 2.5% of the White (British/Irish) group. Levels of under-occupation are also lower amongst BME groups than for White (British/Irish) households.

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Figure 50: Occupancy Rating by Ethnic Group – Isle of Wight

100% 2.5% 5.5% 5.1% 1.4% 10.9% 8.6% 90% 24.5% 80% 29.6% 34.7% 39.9% 70% 39.1% 41.4% 60% 37.9% 50% 34.0% 38.9% 40% 35.4% 26.3% 25.7% 30%

%of households group in 20% 35.1% 30.8% 25.0% 10% 19.6% 23.7% 24.3% 0% White White Other Mixed Asian Black Other British/Irish +2 or more +1 0 -1 or less

Source: 2011 Census

Households with Children (Family Households)

9.45 The number of families on the Isle of Wight (defined for the purpose of this assessment as any household which contains at least one dependent child) currently totals 15,252 accounting for 25% of households. The demographic projection (linked to past trends) suggests that the number of children (aged Under 15) is expected to decrease slightly from 2011 to 2036 (a decrease of around 100 from 20,900 to 20,800).

Table 65: Households with Dependent Children (2011)

Household type Number % Married couple 7,373 12.1% Cohabiting couple 2,526 4.1% Lone parent 4,164 6.8% Other households 1,189 1.9% All other households (no dependent children) 45,833 75.0% Total 61,085 100.0% Total with dependent children 15,252 25.0% Source: ONS (2011 Census)

9.46 The figure below shows the current tenure of households with dependent children. There are some considerable differences by household type with lone parents having a very high proportion living in the social rented sector and also in private rented accommodation. Around 33% of lone parent households are owner-occupiers compared with 76% of married couples with children.

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Figure 51: Tenure of Households with Dependent Children – Isle of Wight

100% 0.6% 0.5% 0.9% 0.7% 1.4% 1.2% 0.7% 90% 15.3% 19.3% 14.6% 17.4% 26.0% 80% 8.5% 36.1% 40.6% 9.3% 11.0% 10.7% 70% 14.9% 60% 23.5% 17.6% 29.6% 50% 63.3% 25.9% 46.9% 40% 47.8% 30% 39.8% 51.2% % % of householdsgroup in 20% 25.6% 41.1% 10% 22.1% 12.3% 7.1% 10.6% 0% 6.1% Married couple Cohabiting Lone parent Other All other All households All households couple households households (no with dependent dependent children children)

Owner-occupied (no mortgage) Owner-occupied (with mortgage) Social rented Private rented Other Source: 2011 Census

9.47 Overcrowding is often a key theme when looking at the housing needs of households with children and the figure below shows that households with children are about seven times more likely than other households to be overcrowded. In total, some 8% of all households with dependent children are overcrowded. The data shows 9% of lone parent households are overcrowded along with 23% of ‘other’ households with dependent children. Levels of under-occupancy are also very low.

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Figure 52: Occupancy Rating and Households with Dependent Children

100% 1.0% 2.7% 4.5% 6.3% 9.3% 7.6% 90% 22.8% 18.5% 24.8% 80%

36.5% 70% 49.6% 43.8% 54.5% 38.3% 60% 39.4% 37.7% 50% 40% 41.2% 30% 35.9% 35.0% 26.2% 29.8% 42.2% % % of householdsgroup in 20% 34.8% 10% 17.8% 9.1% 11.6% 12.8% 0% 6.4% Married couple Cohabiting Lone parent Other All other All households All households couple households households (no with dependent dependent children children)

+2 or more +1 0 -1 or less Source: 2011 Census data (from NOMIS)

9.48 Overall, the somewhat limited data available about family households suggests that this group may be quite polarised. Whilst married couple households have high levels of owner-occupation and may well be slightly better off than the general population the data does point to lone parent (and other) households being more disadvantaged. Given that households with children should be seen as a priority for the Council (due to potential vulnerability) this points towards ensuring that the housing offer meets the needs of such households and in particular the need to ensure a reasonable quality of housing in the private rented sector.

Young People

9.49 Providing for the needs of younger person households may also be an important consideration for the Council. Given ageing populations, the ability to retain young people in an area can assist in providing a more balanced demographic profile as well as providing a vital part of the local workforce. Young people may however find barriers to accessing housing given typically lower incomes and potential difficulties in securing mortgage finance (linked to households’ savings).

9.50 The demographic projections suggest that in 2011 there were around 7,200 households headed by someone aged under 35. This is set to remain largely unchanged over the period from 2011 to 2036.

9.51 As well as households headed by a younger person there will be others living as part of another household (typically with parents). The table below shows the number of households on the Island

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with non-dependent children. In total, some 8% of households (5,100) contain non-dependent children. This may to some degree highlight the difficulties faced by young people in accessing housing, although some households may live with parents for other reasons (such as to provide support to older parents etc.).

Table 66: Households with non-dependent children (2011) Household type Number %

Married couple 2,774 4.5% Cohabiting couple 289 0.5% Lone parent 2,015 3.3% All other households 56,007 91.7% Total 61,085 100.0% Total with non-dependent children 5,078 8.3% Source: ONS (2011 Census)

9.52 Moving back to study households that are currently headed by a younger person we can use 2011 Census data to look at some key characteristics. The figure below shows the tenure groups of these households (compared with other age groups). The data clearly shows that very few younger households are owner-occupiers with a particular reliance on the private rented sector and to a lesser degree social rented housing.

Figure 53: Tenure by age of HRP – Isle of Wight

100% 2.6% 1.8% 1.8% 2.4% 7.8% 6.8% 3.6% 2.8% 10.9% 6.5% 4.5% 3.9% 90% 15.8% 21.8% 8.3% 8.6% 9.7% 8.7% 80% 7.3% 5.4% 12.1% 10.7% 42.0% 70% 13.4% 56.6% 60% 37.1% 29.6% 50% 13.9% 40% 77.2% 77.4% 50.6% 71.3% 30% %of households group in 22.4% 20% 32.5% 41.5% 41.1% 10% 9.6% 11.6% 0% 3.5% 4.8%

Age 25 to 34 Age 35 to 49 Age 50 to 64 Age 65 to 74 Age 75 to 84 All households Age 85 and over Age 24 and under Owner-occupied (no mortgage) Owner-occupied (with mortgage) Social rented Private rented Other Source: 2011 Census

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9.53 Census data can also be used to look at economic activity rates; including employment and unemployment levels. Data about this is shown in the figure below. The data shows that younger people are far more likely to be unemployed than other age groups. The data shows that of the population aged 16-34 some 10.3% are unemployed – included within this we see an unemployment rate of 17% for those aged 21-22 and 14% in the 16-19 age group.

Figure 54: Economic activity by age (people) – Isle of Wight

100% 4.1% 11.3% 15.1% 15.1% 90% 15.5% 15.7% 16.1% 15.4% 17.8% 7.2% 25.7% 3.1% 1.8% 4.6% 4.3% 80% 8.1% 5.6% 5.6% 3.8% 40.9% 11.2% 45.6% 16.9% 54.5% 70% 3.8%

60% 3.2% 90.6% 4.3% 50% 13.9% 1.7% 40% 77.7% 77.5% 79.5% 80.2% 78.1% 70.6% 74.6% 70.4% 64.5%

%of households group in 30% 51.7% 43.7% 20% 36.4% 10% 9.1% 0% Age 16 Age 20 Age 22 Age 25 Age 30 Age 35 Age 40 Age 45 Age 50 Age 55 Age 60 Age 65 All to 19 to 21 to 24 to 29 to 34 to 39 to 44 to 49 to 54 to 59 to 64 and aged over 16 and over Working Unemployed Student Other

Source: 2011 Census

Self Build or Custom Build

9.54 SHMAs need to investigate the contribution that self-build makes toward the local supply. It is referred to in the NPPF and in ‘Laying the Foundations – a Housing Strategy for England 2010’. The strategy states that only one in 10 new homes in Britain was self-built in 2010 that the barriers for the sector to grow are lack of land, limited finance and mortgage products, restrictive regulation and a lack of impartial information for potential custom home builders. However the Government aspires to make self-build a ‘mainstream housing option’ by making funding available to support self builders and by asking local authorities to champion the sector. Up to £30m of funding has been made available via the Custom Build programme administered by the HCA to provide short-term project finance to help unlock group custom build or self-build schemes. The fund can be used to cover eligible costs such as land acquisition, site preparation, infrastructure, S106 planning obligations etc.

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9.55 Recent research into the self-build market is limited. The Joseph Rowntree Foundation report ‘The current state of the self-build housing market (2001)’. However market conditions have changed since then and government schemes such as help to buy and increased competition amongst house-builders has arguably removed some of the motivation from potential self builders.

9.56 Interestingly, the media has focussed on custom build. We are aware of many popular radio and TV programmes that have made case studies of custom build projects. The genre is also significant from an investment point of view given that there have been very poor returns on personal or business deposits since 2008.

9.57 Since the publication of the NPPF we have carried out bespoke qualitative research into self build as part of our SHMA methodology. We have sought information from local authority planning departments; estate agents, the internet and a small number of self builders. We have adopted a wide definition of self build and conclude that the term ‘custom build’ is probably a better description of the sector. This is because the initiator can be involved in construction, produce or project manage the project or simply commission a project for professionals and house builders to deliver. The initiator may not be the occupier, seeing the project as an investment for sale or rent.

9.58 Quantitative information is hard to come by. Planning officers are not required to keep records as and frequently draw our attention to the fact that a custom build classification is not included on the national 1APP planning forms and/or the building regulations forms. Information from local authority planning officers is therefore anecdotal. Most officers tell us that activity as a percentage of completions is low, ranging from ‘next to nothing’ to 10% although most say that the level is under 5%. They tell us that dwellings can have design merit but can require more input from planning and building control officers.

9.59 Officers also refer to the construction of annexes. These will be standalone self-contained dwellings and are often constructed for employees or family members some of whom may be frail or disabled in some way. Planning officers told us that planning conditions are mostly applied to ensure that occupancy is connected to the main dwelling in some way.

9.60 Estate agents tell us that they are frequently involved in valuations where there is potential for ‘intensification’, for example the potential for constructing dwellings on large gardens or corner plots. Local planning policy may be adopted to restrict this if it is considered that an area is in danger of being over developed. Lack of open space and problematic car parking and infrastructure capacity have been cited as considerations. Agents involved in the re-sale of custom built housing tell us that they rarely encounter problems with lenders as surveyors are always involved in the process. Estate agents tell us that older low density estates can attract custom builders. They have cited areas where small low value dwellings on large plots have been demolished and new dwellings

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established. They tell us that custom build tends to occur mostly in areas that are becoming fashionable and within rural settlements and in coastal areas and some will be second homes.

9.61 Whilst most new housing is constructed by the volume house builders we have come across many local house builders who develop small plots for individual clients – many for the rental market. Landlords have told us that this is a more cost effective route than purchasing off volume builders. Some landlords generate significant cash surpluses from their portfolio and choose to invest in this way as returns are more attractive than other investments. At the other end of the scale we have interviewed entrepreneurs and individuals with large savings who will use their local knowledge and skill to acquire individual vacant plots and custom build. Two such entrepreneurs we came across were planning to use the dwelling in the tourist rather than residential sector. We have also come across a medium size regional house builder whose key selling point is that he will customise his products for the purchaser and was offering dwellings within the Help to Buy scheme.

9.62 Finally we have reviewed a number of websites dedicated to advising and assisting people to self- build. Some assist in the brokerage of individual building plots and this is part of our SHMA information gathering.

9.63 Overall the evidence we have collected across England suggest that this is a niche sector, but one that is not necessarily only delivering high value bespoke homes. It is clear that much activity is undertaken by entrepreneurs aimed at more modest homes for sale or rent and in doing so making better use of land that may detract from the local environment. It is also clear that the role of a local champion for the sector is a step that needs to be taken if further interest is to be generated. It is noteworthy that all of the examples of custom build we have come across have been commissioned by individuals or entrepreneurs with savings, rather than borrowings. These points will need to be addressed if custom build is to become ‘a mainstream option’.

Implications for Meeting the Needs of Specific Groups

9.64 The size of the older person population on the Island is significant when compared with national figures and is projected to increase significantly up until 2036. Life expectancy improvements are a key driver of this.

9.65 Many older persons are likely to want to continue to live in their existing homes as they get older. Some may require support to do so, including adaptions to properties and floating support. Typically the greatest support needs are for alterations to properties (such as to bathrooms, showers and toilets, provision of emergency alarms or help maintaining homes). Many of these can be resolved in situ through adaptations to existing properties and the resource implications of this will need to be planned for.

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9.66 Older persons are more likely to under-occupy homes. In the affordable housing sector, there may be potential to reduce (or seek to limit potential growth in) under-occupation and the Council may wish to consider providing support and incentives to social housing tenants to downsize. This will help to release larger affordable homes for overcrowded households. An analysis of older person households suggests that single pensioner households are more likely to live in social rented housing, i.e. the proportion who live in social rented homes is higher in relative terms than for other groups in the population. With the projected increases in older persons there may therefore be additional pressure on the affordable housing stock from such households.

9.67 Our analysis also suggests that the growing older population (particularly in the oldest age groups) will result in a growth in households with specialist housing needs. The analysis above suggests a 123% growth in the older population with dementia, and an 88% increase in the older population with mobility problems. From a planning point of view, some of these people will require specialist housing such as extra care provision and it may well be appropriate to set out policies for such accommodation in development plans. Increasing numbers of older people with health problems will also require joint-working between housing and health (Council and NHS). Our analysis suggests a requirement for around 74 additional housing units to be specialist accommodation across the Island to meet the needs of the older person population each year moving to 2036.

9.68 Analysis of younger person households shows a high reliance on rented housing. Younger age cohorts may therefore be forced into private rented (including shared) housing as the only means of meeting their housing needs, aside from residing with parents, where they would not form a head of household. Factors such as a balanced approach to housing in terms of bedroom sizes and property types, along with high standards for Houses in Multiple Occupation (HMOs) will help younger households to access housing.

9.69 Currently 29% of households contain someone with a long-term health problem or disability. Demographic trends are expected to lead to a significant growth in the population and number of households with disabilities over the period to 2036. Housing support services, including provision of adaptations to properties, will need to be adequately resourced to take account of this.

9.70 The BME population on the Island has grown strongly since 2001. The 2011 Census shows that BME groups make up 4.6% of the Island population (up from 2.6% in 2001). The Asian, Mixed and White: Other populations (which includes Eastern European migrants) have all grown notably. BME households appear to be typically younger and less likely to be owner occupiers than the White (British/Irish) population; there is also a greater reliance on the private rented sector. BME households are also more likely to be overcrowded and less likely to under-occupy dwellings.

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9.71 The implications of this are more for housing strategy than planning, and suggest a need to consider particularly how the needs of different groups are met within the local housing market, to explore the reasons for higher levels of overcrowding in BME communities and how this can be addressed. It will also be important to consider the role which the Private Rented Sector plays in meeting needs of new migrant communities and the standards of housing in this sector. Investigating these issues in greater detail may assist development of strategic housing policies.

9.72 Equally lone parent households appear to be disadvantaged in the housing market, with a greater reliance on private and social rented housing. It will be important that affordable housing provision is accessible to this group.

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10 CONCLUSIONS AND RECOMMENDATIONS

10.1 The National Planning Policy Framework (NPPF) states that local planning authorities should use their evidence base to ensure Local Plans meet the full, objectively assessed needs for market and affordable housing in their housing market area (HMA). The Isle of Wight represents its own housing market area. This reflects the physical barrier of the sea; and the limited migration and commuting links to local authorities on the mainland relative to the links from these areas to other adjoining authorities.

Overall Housing Requirement

10.2 The NPPF sets out that plans should be prepared on the basis of meeting full requirements for market and affordable housing. The draft Planning Practice Guidance sets out that the latest national projections should be seen as a starting point but that authorities may consider sensitivity testing projections in response to local circumstances and the latest demographic evidence.

10.3 In accordance with the draft planning guidance, the 2011-based SNPP and related CLG household projections have formed the starting point for our assessment. These indicate growth of 564 households per annum over the period to 2021. There are a number of limitations with this projection: it only covers the period to 2021; the projection is based largely on pre-Census data; and it appears to build in a degree of suppressed household formation. For comparative purposes the previous (2008-based) CLG Household Projections indicated household growth of 821 per annum.

10.4 The reduction in the level of household growth projected is partly a reflection of a downward trend in net migration to the Island; but is likely to also be influenced in part by constrained household formation. An issue which concerns us here is the degree to which this reduced migration has partly been a reflection of market/economic circumstances and thus that migration could increase as the economic backdrop improves.

10.5 In this report we have therefore been through a stepped process to update the demographic projections for the latest evidence, and to ensure that they do not constrain household formation in projecting forward. This results in a revised (demographic-based) assessment of housing need for 589 homes per annum. This represents our core projection of housing need based on past demographic trends.

10.6 The draft guidance then sets three key tests which should be applied in order to identify whether there is a case to adjust the starting point. We see these tests as:

 Do market signals point to a need to increase housing supply in order to address affordability and high demand?

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 Is there a need to increase overall housing supply in order to boost delivery affordable homes to meet identified needs?

 Is there evidence that an increase in housing supply is needed to ensure a sufficient labour supply to support forecast economic and employment growth?

Test 1: Do market signals point to a need to increase housing supply in order to address affordability and high demand?

10.7 The draft Planning Practice Guidance sets out that the housing need suggested by household projections should be adjusted to reflect appropriate market signals and indicators of the balance between the demand for and supply of homes. It sets out that the more significant the affordability constraints (in terms of rising housing costs and worsening affordability) the larger the additional supply response required.

10.8 On the Island, and indeed across much of the country, there has been a fundamental shift in housing market conditions since 2007, particularly in relation to confidence and credit availability. Over the period since 2009 we have seen low volumes of sales and a weak recovery in effective demand. Supply has also been limited and we have seen some price growth; but at a rate which does not suggest that there has been a substantive supply-demand balance.

10.9 Housing costs on the Island for semi-detached, terraced homes and flats/maisonettes are lower than in nearby areas on the mainland such as Gosport, Southampton, and Portsmouth. In each case they are also notably below the South East average. Detached prices are higher in comparative terms, and this is likely to reflect higher income households from the mainland buying property on the Island.

10.10 Housing affordability is better (in regard to the lower quartile house price to income ratio) than most other parts of the South East, although it is slightly above the England average. There are some local affordability pressures – whereby in particular local working households are unable to afford to buy a home. Over the period since 2001 we have seen a notable growth in private renting, and this is likely to be one of the drivers of this.

10.11 Overall the market signals point towards a case to consider a modest upward adjustment to the demographic-based assessment of need in order in particular to improve access to (market) housing from local working households. It may however be partly possible to influence this through policies on the mix of housing delivered.

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Test 2: Is there a need to increase overall housing supply in order to boost delivery affordable homes to meet identified needs?

10.12 The second test is to consider the ability of overall housing numbers to ensure affordable housing needs can be satisfied. Affordable housing is defined as including social rented, affordable rented and intermediate housing. Following the approach advocated by the draft guidance, the net affordable housing need identified on the Island for 304 homes per year (based on the core modelling assumptions excluding housing in the development pipeline).

10.13 If 30% affordable housing delivery is achieved, to meet this scale of need in full would require provision of around 1,000 homes per annum. However this is a somewhat theoretical situation as:

 The modelling is based on the assumption that household spend no more than 30% of their gross income on housing costs. Some may choose to spend more to access private market housing;  The analysis does not take account of the role which the private rented sector can potentially play in contributing to meeting some of the shortfall in genuine affordable housing. This is relevant in considering policies for overall housing provision.

10.14 The SHMA indicates that based on current circumstances the supply of lettings to LHA claimants in the Private Rented Sector is 781 per annum to new claimants. However it is likely that with the caps on growth in LHA coupled with the potential impact of the introduction of Universal Credit, the number of landlords willing to take LHA claimants could fall. This may be offset by reduced demand from other households who are able to move from rented accommodation to buying a home.

10.15 Overall the affordable housing evidence could provide some basis for considering an upwards adjustment from the demographic-based assessment of requirement in order to secure stronger provision of affordable housing.

Test 3: Is there evidence that an increase in housing supply is needed to ensure a sufficient labour supply to support forecast economic and employment growth?

10.16 In line with the draft guidance, we have also considered the implications of future economic and employment trends on housing needs by modelling the housing which would be required to meet the level of employment growth forecast by the Oxford Economics forecasts.

10.17 To meet forecast employment growth would require provision of between 539-545 homes per annum. This falls below the core demographic-based projection and thus there is not a case for considering an upwards adjustment to housing provision to support economic growth.

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Overall Conclusion on Housing Needs

10.18 Drawing the range of evidence together, we conclude that provision of 589 homes per annum reflects a “baseline” level of housing provision to meet objectively-assessed needs.

10.19 The Isle of Wight Council might consider in reviewing its current housing requirement the potential to support higher housing delivery overall, to increase affordable housing delivery and support improvements in the affordability of market housing.

10.20 It should be recognised that this is an objective assessment of housing need and takes no account of land supply or development constraints, such as land availability, environmental constraints or the feasibility of delivering infrastructure to support sustainable development. The NPPF and draft practice guidance dictates that assessments are undertaken in this way. This is not to say by any means that these issues are unimportant – the Council will consider these issues in detail in testing development options in preparing the Local Plan. The draft Planning Practice Guidance47 is clear on these issues setting out that “plan makers should not apply constraints to the overall assessment of need, such as limitations imposed by the supply of land for development, historical under performance, infrastructure or environmental constraints. However these considerations will need to be addressed when bringing evidence bases together to identify specific policies within development plans.”

10.21 These issues will need to be considered in translating an assessment of need into policy targets for housing provision. In doing so we would recommend that the Council tests different options for housing provision. These should be assessed through Sustainability Appraisal.

Requirements for Different Types and Sizes of Housing

10.22 The NPPF also requires local planning authorities, through the SHMA, to identify the range of types and sizes of accommodation likely to be needed by the population in future, including that required by those groups with specific housing needs.

10.23 Our assessment of affordable housing needs indicates that, in delivering affordable units, an Island- wide mix target of 20% intermediate equity-based products and 80% rented affordable housing would be appropriate. Any strategic policy should however retain a degree of flexibility both to take account of local level variations which we have identified as well as any site specific issues with deliverability (i.e. grant funding availability).

10.24 In terms of size mix, our analysis (taking account of demographic trends and market evidence) concludes that the following represents an appropriate mix of affordable and market homes. It

47 CLG (Aug 2013) Draft Planning Practice Guidance – Assessment of Housing and Economic Development Needs

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should however be noted that this analysis is aimed at informing strategic policies, but that there will be a range of factors which will influence demand for different sizes of homes over time, particularly demographic changes, growth in real earning/savings; housing affordability and wider economic performance.

Table 67: Indicative Need for different Dwelling Sizes (2011-36) 1-bed 2-bed 3-bed 4+ bed Market 5-10% 45% 40% 5-10% Affordable 30-35% 35-40% 20-25% 5-10%

10.25 The mix of housing suggested takes account of the age structure of the population and opportunity which there might be to support households in downsizing to accommodation more appropriate to their needs.

10.26 In the affordable sector, we recommend that the focus of provision is on smaller properties. This takes account of the current Government reforms to social housing and welfare, including issues associated with the changes introduced by Government to housing benefit eligibility for working-age households in the social housing sector and may change over time.

10.27 For market housing, we recommend that the focus of new provision is on two and three-bed properties. This would serve to meet from the needs of newly forming households and younger families as well as demand from older households downsizing and looking to release equity in existing homes, but still retain flexibility for friends and family to come and stay.

10.28 The mix identified above should inform island-wide policies and help to inform the ‘portfolio’ of sites which are considered and ultimately allocated through the Local Plan process. However, we would again recommend that strategic policy retains a reasonable degree of flexibility to ensure that, in applying mix to individual development sites, appropriate regard can be given to the nature of the development site, the character and existing housing stock of the area as well as the most up-to- date evidence of need/demand.

10.29 Our analysis shows that addressing the housing needs of older people will be important on the Island given the significant projected growth in the over 65 population over the period to 2036 The mix recommendations in both the market and affordable sectors take account of this, particularly in respect of delivering smaller units to encourage downsizing and enable older people to move into more manageable accommodation. However, it will be important to consider the quality and type of smaller units if this provision is to meet the specific needs and demands of this group. In addition to general needs housing, we anticipate a growing requirement for specialist housing for older people to meet the needs of this group. A need for around 74 units per annum of specialist housing is

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identified. It is expected that this will comprise principally extra care housing, and include a mix of market and affordable provision.

10.30 The number of people with a limiting long-term health problem or disability is expected to increase by around 12, 600 to 2036 (a 41% increase). All of this increase and more (104%) is expected to be in age groups aged 65 and over. As such there will be a need to consider adaptation (and adaptability) in both existing stock and new homes. Opportunities to deliver more accessible types of accommodation, including lifetime homes, should also be explored.

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