An annual baseline is set by dividing the growth in household numbers over 10 years by 10.
This baseline is multiplied by an adjustment derived from workplace affordability and the difference between workplace affordability now and 10 years earlier.
The formula is designed to add at least 300,000 new houses per year in England.
Full details of the formula and a worked example are given in our detailed paper.
Growth in household numbers
ONS project a 7,920 growth in Teignbridge household numbers between 2020 and 2030. The chart on the right shows that the majority of these will be pensioners. Of those who are of working age it is likely that a significant proportion will be commuters.
Growth of 7920 over 10 years gives an annual baseline of 792 houses.
Workplace affordability is median house prices divided by median workplace earnings. So is a measure of the relationship of house prices in Teignbridge to pay in Teignbridge. The following chart shows the workplace affordability now and 10 years ago over the last few years:
Both now and 10 years ago affordability has been falling, which means that houses are becoming more affordable. 10 years ago we were recovering from a financial crisis and in 2010 after the general election the housing market stalled, causing a low in house prices and so affordability.
The government’s stated purpose in to have a formula which is reactive to deterioration in affordability in areas that are growing, such as areas of the Northern Powerhouse. Comparison with 10 years ago in this case fails because slight changes now are dwarfed by big changes 10 years ago.
The adjustments calculated using affordability over the last few years are shown below:
The adjustment varies considerably from year to year and does not have to have a relationship to recent changes in availability.
As many worker commute out of the district and the majority of household growth is in the older non-working population, we don’t think that workplace affordability is an appropriate measure.
Age based affordability
We have calculated affordability for pensioners aged under 75, and those aged 75 and over, based on median gross incomes for England. Currently pensioner incomes in the South West are higher that nationally:
This suggests that affordability for older pensioners is about the same as for the working population, but affordability is substantially lower for younger pensioners. This only considers earnings, it does not consider the larger capital resources that pensioners can have in housing, pensions and other investments.
Residential earnings are the earnings of residents of a district.
Residential affordability is median house price divided by median residential earnings.
ONS also publish median residential earnings for each financial year, so we can compare median residential and workplace earnings.
Residential earnings for Teignbridge are consistently higher that workplace earnings.
Comparison with Exeter
We have also considered the relationship of residential and workplace earnings in Exeter, and see an opposite relationship:
Here residential earnings are lower than workplace earnings, though recently the two have converged.
The effect of using residential earnings, rather than workplace earnings would be to make affordability lower in Teignbridge, and in earlier years higher in Exeter. This would result in more houses in Exeter and fewer in Teignbridge.
This would mean that more people who worked in Exeter lived in Exeter, so there would be less commuting, which would be likely to be by car.
What has this to do with climate change?
When a traditionally built house is constructed there are about 60tonnes of Carbon Dioxide equivalent (t CO2e) of Green House Gas (GHG) emissions. Building 1532 additional houses would cause embedded emissions of 93kT CO2e which is about half Teignbridge’s domestic emissions of 182kT CO2e (for 2018). On this basis the previous formula’s 760 houses would have emitted 46kT CO2e.
We have also demonstrated that using residential earnings would lead to more homes being built in areas with high earnings, which would lead to less commuting.
In 2018 road transport emissions for Teignbridge were 402 ktCO2e of which 329.8 ktCO2e were on A roads and motorways. These roads account for 45% of all emissions produced in Teignbridge.
The following map shows these emissions allocated according to traffic flows in the road network in Teignbridge.
An interactive version of this map can be found here.
Are 300,000 houses per year needed
ONS project that between 2020 and 2030 1.6 million households will be formed in England, nowhere near 3 million.
The consultation says: “The Government has based the proposed new approach on a number of principles for reform. These include ensuring that the new standard method delivers a number nationally that is consistent with the commitment to plan for the delivery of 300,000 new homes a year, a focus on achieving a more appropriate distribution of homes, and on targeting more homes into areas where they are least affordable.”
So the new standard method for calculating housing numbers takes into account existing housing stock, as well as projected household growth. It also puts more emphasis on affordability by taking into account changes over time, and it inflates the final number by removing the 40% cap that currently applies.
Building 300,000 houses a year, rather than 160,000 means that 140,000 extra houses will be built. Using 60t per house, embedded emissions from these additional houses will be 8.4Mt , UK GHG emissions in 2019 were 351.5Mt, so this is unnecessary housebuilding could add 2.4% to UK emissions each year.
It would be better to reduce new housing numbers, and divert building trades resources to retro-fitting existing buildings so that these are as energy efficient as possible.
Research by the UK Collaborative Centre for Housing Evidence provides an alternative, and in our view more plausible explanation of the causes. Housing evidence has calculated that there were 1.12million surplus houses by March 2018, and that taking this into account net additions to housing stock exceed household formations.
In Teignbridge, since compatible records began in 2001, 497 houses have been completed than households formed. In addition there have been changes of use, conversions and retrofits that have effectively increased the housing stock, that are not counted in new build housing numbers.
In Teignbridge it is doubtful that building more houses will have much effect on affordability, because the majority of new housing that is built is out of reach for people on Teignbridge median earnings, and will mainly be bought by people whose income comes from outside the district. If house prices were to drop such that development was unprofitable, developers would just stop building and wait for the situation to correct.
We agree that tackling some of the other causes would be more effective:
Privatisation of council housing
Relaxation of restrictions on buy to let mortgages
Low median incomes
The lack of income progression recently in early careers.
Difficulty of accessing mortgage finance.
Competition with buy-to-let landlords.
Speculative purchase of housing as an investment asset, particularly by foreign buyers.
Unfortunately the government is intent on building 300,000 houses a year, so the consultation doesn’t offer much opportunity to comment on that.
Timetable for Teignbridge Local Plan
The consultation gives a tight timetable for submission of part 2 plans in order to be exempt from these requirements.
This starts development of part 2 of the plan in January 2021, and consults on sites in the period leading to September 2021. This plan is then submitted for inspection in April 2023. If the new formula is adopted by the end of 2020, then in order to be exempt from the new requirements, the council will have until September 2021 to submit a plan to the inspector. This sounds like an extremely challenging contraction of the planning process.
It is therefore likely that TDC will be obliged to comply with this formula, and so will need to identify additional sites, which will extend the plan timetable further.
In 2019 nearly 70% of Teignbridge’s existing housing stock had an EPC rating D and below. Despite the significant increase in new build, this % has changed little in the past 10 years and, in the last 2 years, has actually increased.
Green-House Gas (GHG) emissions from heating our buildings are significant with Teignbridge’s domestic emissions in 2018 accounted for approximately 25% of all its emissions, most of this from heating.
In order to to reach the UK’s Paris targets we can reduce emissions by retrofitting properties to:
decarbonise heating energy, by using low-carbon fuel sources (eg Biomass & Hydrogen) or switch to electric heating (eg. Heat Pumps) and using low-carbon electricity generation.
reduce the heating energy demanded by eliminating waste and minimising heat loss (ie with better insulation).
Homeowners invest significantly in home-improvements, especially in the able-to-pay sector, however this sector tends to have the highest GHG emissions, primarily because energy pricing is still low relative to incomes in that sector.
Whilst Climate Change is accepted as a serious threat by the majority of the population, including the able-to-pay-sector, it is still the case that, in general, they do not act to address their contribution to Climate Change.
Those who do act are faced with a plethora of solutions, deals and government incentives. More often than not, many are either disappointed that their emissions and running costs have not reduced significantly or they do not measure the GHG emission reduction to find out. One of the most common concerns is ‘can I trust the salesperson?’ followed by ‘will the builder do a good job?’.
To address this, ACT is considering an initiative, initially targeted at the able-to-pay, to identify local commercial organisations with the expertise and quality of work, backed by relevant industry standards, to deliver bespoke whole house retrofit solutions.
By identifying suitable customers, designers, architects, builders and material suppliers we hope to demonstrate that a sufficient market can be stimulated to become self-sustaining. This will of course represent a small percentage of the retrofit needed, but it could be a model to deliver more ambitious initiatives such as in the Carbon Coop model.
Teignbridge District Council does not currently have plans, or resources, to formally address this and Housing Associations will develop their own specific supply-chain solutions.
Teignbridge has a large number of older, poorly insulated, rural properties. Increasingly these properties are owned by those wanting to undertake significant improvements and having the budgets to do so. Normally a piecemeal approach, based on little (if any) measurements or holistic assessment, results in costly retrofits and inappropriate heating solutions.
As an impartial community-based organisation ACT is ideally placed to bring the different parties together under a replicable scheme of effective retrofits, helping to develop a template scheme for both homeowners and service providers.
The initial model proposed is that adopted by the Carbon Coop, based around an assessment/design phase and using suitably experienced local builders/crafts people.
To get the scheme started, ACT would need someone to either volunteer or be paid (grant funding may be available) to identify suitable providers and customers and liaise with similar groups to discover their approach and put a proposal together on how it could work in Teignbridge.
Ideally, we should also find a customer with a retrofit project willing to work with ACT’s Built Environment & Energy group to pilot some of the approaches already well understood. Trialling each of the elements of the scheme to identify an appropriate supply chain should help identify problems that may occur. Several such projects are likely to be needed before a Teignbridge-specific model is developed.
Are you interested? If so, drop us an email with your details.