Estimating Housing

Requirements in Changing

Times

East Midlands Councils CPD Seminar

19th November 2013

Neil McDonald: Visiting Fellow CCHPR

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Estimating housing requirements in

changing times

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• How times are changing

• How housing requirements are estimated

• Why the population projections have changed

• Why the household projections have changed

• Intelligent use of the latest official projections

How times are changing

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Big and unexpected changes in

the last 10 years

• Census found more people

but fewer households

• Average household size

did not fall between

censuses

• 375,000 fewer households

“only” 1.7% of households

• … but 20% of expected

increase

• Nearly a million fewer one

person households

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Regional

variations

• In all but one region there were

more people than expected

• Difference was greatest in

London

• In the North East slightly fewer

people were found than

expected

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Big differences by age group

• 7% fewer

households

headed by

someone aged 25-

34 than expected

• More household

found than

expected in the

45-54 and 55-64

age groups

A confusing picture

• Latest official LA household growth projections range from 320% faster to 165% slower than previous projections.

• Large variation in small areas e.g. Surrey:+48% to -29%

• Why such large variations?

• Can we trust these apparently random results?

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How housing

requirements are

estimated

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How housing requirements are estimated

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Project population

Project ‘tendency to form households’ – household formation

rates

Household projections

Add allowances for unmet need and vacant homes

Housing requirement

How housing requirements are estimated

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ONS project national population – 6 November 2013

ONS project local authority populations – May-June 2014

DCLG project household growth – later in 2014

Why the population

projections have

changed

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What causes a population to change?

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Population in the future

==

Population now

++

Those who come

--

Those who go

What causes a population to change?

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Population in the future

==

Population now

++

Births + UK arrivals + International arrivals

--

Those who go

What causes a population to change?

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Population in the future

==

Population now

++

Births + UK arrivals + International arrivals

--

Deaths + UK flows out + International departures

Projecting Population Change

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National projections

Births, deaths and international flows

Local authority area projections

Big issues are sharing out international flows

and projecting flows from one authority to

another

Population projections for England

• 2010-based

population growth

13% faster than 2008

• 2011-based

population growth

5% faster than 2010

• 2012-based

population growth

16% slower than

2011

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Births : England

• 2010 and 2011-based

projections

overestimated birth

rates

• 2011-based projection

applied overestimated

birth rates to census

baseline

• 2012-based projection

re-worked rates

• Not important for

housing as children

don’t form

households

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Deaths : England

• Differences not very

significant

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International migration : England

• Considerable variation

over last 20 years!

• Long term projection

gone up and down in

last three full

projections:

2008: 157,000

2010: 173,000

2012: 144,000

Why projected population growth for

England has fallen by 16%

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• Lower birth rates – correcting over-estimate

in 2011-based projections

• Lower net international migration

LA population projections: international

migration

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• Allocating migrants to LAs is difficult

• Old method used IPS to distribute to regions and to

smaller geographies; modelling for final step to LAs

• New method uses administrative data to distribute

direct from national totals to LAs, e.g.:– National insurance data used to distribute workers

– Higher Education Statistics Agency data to distribute

students

• Evidence that new method is better predictor of 2011

census results

Internal migration: example

• Net internal migration

often biggest driver of

LA population change

• Net change often small

difference between

large gross flows e.g.

• Flow in up: 2%

• Flow out down: 3%

• Net (outward) flow

down 51%

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Limitations of 2011-based projections

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• 2011-based population projections are interim: they

applied 2010-based trends

• Internal migration flows estimated by calculating

outward flow rates from each LA

• If population was larger than thought actual flow rate

would have been smaller than estimated

• Results in outflows being over-estimated

• As many under-estimates as over-estimates

Internal migration: example

• Can compare past UK flows with what has been assumed in 2011-based

projections – identifying cases of over and underestimation

• Expect 2012-based projections to be better – and to change growth rates

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Why the household

projections have

changed

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Household projections: what

to make of the evidence from

the census

• Blue line shows what

was expected to happen

to headship rates

• Dotted orange line

shows what appears to

have happened

• Solid orange line shows

the latest projection –

which continues the

apparent trend

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What has caused the changes

in headship rates?

• International migration

– Recent “in” migrants tend to live in larger

households

• Changes to patterns of household formation

– Particular impacts on younger age groups

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Increased international migration

• Much higher international

migration inflows in 2001-11 than

in 1991-2001

• Implies much larger population of

recent migrants in 2011 than in

2001

• If proportion of recent migrants is

larger, average household size is

also going to be larger – so fewer

households than expected

• Accounts for ~200,000 of 375,000

household shortfall

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Changing household formation

patterns

• ½ million more 20-

34 year olds living

with parents in

2011 than in 2001

• People living

longer in shared

houses and flats

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What has caused the changes in

household formation patterns?

• Changes in headship rates and

numbers of adult children

living with parents pre-date

credit crunch and recession

• Suggests cause is not just

economy/shortage of

mortgage finance but also

affordability

• Affordability depends on

supply and demand: no

guarantee of short term

improvement!

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New projections imply increasing

divergence from previous trends

• For some age groups the

latest projections assume

that the future household

formation pattern will

continue to diverge from

the previous trend

implying either:

• growing international

migration effect

or

• reducing tendency for

young adults to form

households

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New projections imply increasing

divergence from previous trends

• Dotted green line shows

assumption that there is no

further fall in tendency to

form households

• Dotted yellow line assumes

some move back towards

the previous trend

• Both ‘dotted line’ options

are possible and both imply

more homes

How the household projections compare

• ‘Partial return to trend’ option shows what might happen if and when the economy returns to growth and housing supply improves

• Household growth over 20% higher in ‘partial return to trend’ in this example

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Intelligent use of the

latest household

projections

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Intelligent use of the latest

household projections

• National Planning Practice Guidance (NPPG) says official projections

should be starting point for estimating ‘objectively assessed need

– best available but should not to be used uncritically

• Consider whether population projections realistic – looking particularly

at internal migration flows, which could have been affected by use of

2010-based trends

• Assess headship rate trends: do they imply worsening headship rates

for young adults or other groups?

• Develop plan which is robust to a range of outcomes: uncertainty is

inevitable!

• Monitor regularly and be prepared to adjust plan

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Neil McDonald is a Visiting Fellow at the Cambridge Centre for Housing and Planning Research. He

was Chief Executive of the National Housing and Planning Advice Unit up to its closure in July 2010.

He also held various Director-level posts at the DCLG in the housing and planning fields. Since

leaving the civil service in 2011 he has developed an expertise in the application of research and

analysis to assist planning practitioners plan for housing. He has advised local authorities and others

on planning for housing and is the author of “What Households Where?” an analytical tool produced

for the Local Housing Requirement Assessment Working Group and available through their website,

http://www.howmanyhomes.org/.

Email: neilkmcdonald@gmail.com

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