Intelligence: 5 April 2022Housing affordability in England: 2021

The Office for National Statistics (ONS) published new data on housing affordability in England on the 23rd March 2022. This data includes the median affordability ratio which is used to calculate the minimum housing need for local authorities, as required by the 2021 NPPF.

The 2021 ratios reveal a significantly worsening affordability position across the country. Nationally, the median affordability ratio has increased from 7.9 to 9.1 in 12 months. This means a full-time employee earning a median wage could typically expect to spend around 9.1 times their workplace-based annual earnings on purchasing a median priced home, a 15% increase in 12 months.

The table below illustrates how there has been an increase in all regions of the country.

At local authority level, in the last 12 months house prices grew faster than earnings in 91% of local authority districts, leading to a reduction in housing affordability in these areas. The table below lists the authorities where the increase in the ratio over the past 12 months has exceeded 20%. As can be seen the increases are in all regions, from the Isle of Wight in the south to Liverpool in the north west.













The map below the table illustrates the different increases in local authorities across England.

The increase in affordability ratios makes it even more difficult for first time buyers to access the housing market on the one hand, and on the other it increases the housing need calculated using the 2021 NPPF’s standard method.

The standard method provides the minimum level of housing need to be considered by local planning authorities when preparing Local Plans, although as PPG confirms the standard method only provides the starting point in respect of determining housing need. Other factors may show need to be higher.

Prior to the publication of the 2021 ratios last week, the standard method based on 2020 ratios led to national minimum need of approximately 298,000 homes per annum. The 2021 ratios increases this to approximately 305,000 homes per annum.  This is the first time that the standard method calculation has exceeded the 300,000 figure, which Government targeted for delivery per annum by the mid-2020s.

The table below shows the authorities with the top 20 highest proportional increases in their standard method calculation following the publication of the new 2021 ratios.

Although national minimum housing need now exceeds the Government’s target of 300,000 homes per annum, housing need is only the first step. The homes must be delivered in the same quantities. To put this into context, net housing completions across England were 216,489 in 2021, indicating delivery met only 70% of the minimum need calculated by the standard method. The highest level of delivery in England since the turn of the century has been 243,000 homes in 2019/20.

A significant step change in delivery needs to be made if 300,000 new homes are to be delivered annually, and to achieve this a range of factors must be addressed. As the House of Lords ‘Meeting Housing Demand’ report concluded in January 2022, “We welcome the Government’s target to deliver 300,000 homes per year and one million homes by 2025 to address the long-term undersupply of new housing. However, even with increased development through SMEs, ‘build to rent’, self-commissioned homes and local authorities, building will likely still fall short of the target. Without reducing the barriers to meeting housing demand—including skills shortages, lack of available land, resources for local planning authorities, the reduced role of SME housebuilders, inadequate support for social housing provision, and the barriers and delays in the planning system—it will not be possible to get close to this target.”

Failure to address these factors will only serve to exacerbate the significant affordability barriers faced by first time home buyers and result in further increases to the affordability ratios.

If you would like to discuss this data further, do get in touch with Development Economics Associate, Dan Usher.

Posted with the following keywords:
Affordability, Housing Need, ONS, England