Affordability Ratios 2020 – Impact on the Standard Method

Briefing paper

Affordability Ratios 2020

The Office for National Statistics (ONS) released its 2020 house price to workplace-based earnings ratio data on 25 March 2021, which provide affordability ratios for all local authorities in England and Wales. Some key points to note are:

  • In England, the median house price to workplace-based earnings ratio is 7.84 as of 2020. This represents an increase of 14.5% (0.99) over the last decade. Between 2019 and 2020, the affordability ratio for England decreased slightly by 0.5% (from 7.88 in 2019 to 7.84 in 2020).
  • Regionally, London has the highest affordability ratio, at 11.78. Since 2010, this has increased by 43% (from 8.24 to 11.78), however between 2019 and 2020 the affordability ratio in London decreased by 2.2% (from 12.05 to 11.78).
  • The North East has the lowest affordability ratio of 5.03, representing a decrease of 6.9% since 2010 (from 5.4 to 5.03). Between 2019 and 2020, the affordability ratio in the North East decreased by 3.5% (from 5.21 to 5.03).

The affordability ratio figures feed into the Government’s standard methodology calculation for housing in England. Pegasus Group has compared the 2019 and 2020 affordability ratios to look at how the new ratios impact on the standard method housing figures.

Impact on the Standard Method

The adjacent map presents the capped standard method figures based on Pegasus Group calculations. They present the annual housing requirement based on the Government’s standard method calculation between 2021 and 2031 based on the ONS 2014-based household projections and the ONS 2020 median workplace-based house price to income ratio data.

Clicking on each local authority on the map also presents the annual standard method figure over the same time frame using the 2019 affordability ratio data, as well as the total change and percentage change between the two figures. It should be noted that the 2019 affordability ratios were retrospectively updated by ONS in the March 2021 data release. The revised figures for 2019 have been used in the analysis.

Clicking on each local authority on the map also presents the annual standard method figure over the same time using the 2019 affordability ratio data, as well as the total change and percentage change in the two figures. It should be noted that the 2019 affordability ratios were retrospectively updated by ONS in the March 2021 data release. The revised figures for 2019 have been used in the analysis.

Key points to note from the standard method calculations are:

  • Using the 2019 affordability data, the total standard method figure for housing in England was 300,514 per annum between 2021 and 2031. When the 2020 affordability ratios are used in the calculation, this decreases by just under 1,700 (0.6%) dwellings per annum (dpa) – to 298,861.
  • Every region with the exception of Yorkshire and the Humber sees a decrease in its annual standard method figure when the 2020 affordability ratios are incorporated into the calculation instead of the 2019 figures. Yorkshire and The Humber sees a slight increase of 44 dpa (0.2%). In relative terms, the North East sees the largest decrease in the standard method figures of 1.1% (75 dpa) and London sees the largest decrease in absolute terms at 929 dpa (1%).
  • Looking at individual local authorities, Richmondshire sees the biggest percentage increase in its standard method target between the two affordability ratio datasets, with an increase of 11.1%, although this only equates to one additional dwelling per annum (from 9 dpa to 10 dpa). The local authority with the second highest percentage increase is Fareham at 6.7% (an increase of 34 dpa – from 507 dpa to 541 dpa). West Devon saw the largest percentage decrease between the two affordability ratio datasets at 8.3% (a decrease of 26 dpa – from 315 dpa to 289 dpa) followed by the City of London with a decrease of 7.8%. This represents a decrease of 12 dpa – from 154 dpa to 142 dpa.
  • In absolute terms, Bournemouth, Christchurch and Poole see the largest increase in dwellings between the two sets of calculations with the dpa figure increasing from 2,649 using the 2019 affordability ratio data to 2,701 when the 2020 data is used (a 2% increase – 52 dpa). Bournemouth, Christchurch and Poole is followed by Milton Keynes with an increase of 2.7% (48 dpa) between the two datasets. At the opposite end of the spectrum, Southwark sees the largest decrease in dwellings per annum according to the standard method with the figure decreasing by 297 dpa (6.8%), followed by Tower Hamlets with a decrease of 185 dpa (3%) between the two affordability datasets.

Please click on the individual local authorities to see more information. Download our map in pdf here.

For more information, please contact:

  • Neil Tiley, Director – Planning, neil.tiley@pegasusgroup.co.uk or 01285 641717
  • Matthew Good, Director – Planning, matthew.good@pegasusgroup.co.uk or 0113 287 8200
  • Emily Hall, Senior Economic Analyst, emily.hall@pegasusgroup.co.uk or 0161 507 0410