By Neil Tiley, Senior Director at Pegasus Group
Much of the new National Planning Policy Framework (NPPF) is substantively unchanged from the 2024 NPPF when it comes to assessing housing need and housing land supply. While the exact changes are relatively few, there is one material change to the role of ‘windfall’ sites, which affects how the deliverable supply is calculated.
As part of the UK’s imperative to build more homes, national policy continues to require local authorities to maintain a sufficient supply of deliverable sites. More specifically, councils must identify enough ‘deliverable’ housing sites for the next five years, plus a buffer of either 5% or 20%, depending on the historic record of delivery.
Maintaining this five-year housing land supply is a hugely important test within the planning system. Where councils cannot demonstrate a sufficient supply of deliverable sites, this can have significant implications for planning decisions and increase pressure to approve further housing developments.
Let’s dive into what has stayed the same, and what is different in the updated NPPF.
How the NPPF outlines housing need and supply policies
Annex D of the NPPF outlines how housing needs and housing land supply should be assessed. As stated, this is largely the same as the former NPPF:
The standard method for assessing the minimum local housing need remains unchanged;
The consequences of the Housing Delivery Test remain unchanged;
Also unchanged is the annual requirement to identify and update a supply of specific deliverable sites that provide at least five years’ worth of homes. That supply is measured against adopted housing requirements adopted in the last five years, or otherwise against the minimum local housing need of the standard method.
What’s new in the NPPF for calculating housing need and supply?
There is, however, one key difference made to calculating deliverable supply. Under the former NPPF, whilst paragraph 78 required sufficient specific deliverable sites to be identified, paragraph 75 made an allowance for non-specific windfall sites. These are housing sites that were not specifically identified in a local plan but are expected to come forward over time based on past trends.
In this context, it was commonly understood that such a windfall allowance could be included in the supply of specific deliverable sites needed under paragraph 78, notwithstanding the fact that these were not specific sites.
The new NPPF addresses this ambiguity by identifying separate policies that apply to plan-making and decision-making, while also stating that a windfall allowance can only be used for plan-making purposes. This means the deliverable supply used for decision-making must not include any windfall allowance.
Consequently, the deliverable supply – and therefore the five-year land supply positions of many LPAs – will be materially lower than that identified under the former NPPF, owing to removal of the windfall allowance.
The exclusion of a windfall allowance should mean that the forecast supply is closer to the actual number of homes that are delivered. This is a positive change, given that our previous analysis has shown a significant shortfall in the number of homes being delivered compared to what’s being forecast by councils. Between 2019 and 2024, we found 594,551 homes were planned across 118 LPAs, but only 457,809 were built – 30% more homes promised than built.
Will the removal of the windfall allowance be sufficient?
As we have stated previously, the UK lacks a consistent national method for how the deliverable supply is presented. While the removal of the windfall allowance is a positive change, the Government could go farther by standardising the method for presenting this deliverable supply.
In practice, this could include requiring every council to report its housing supply figures to the MHCLG in a standard format annually. This would allow the Government to monitor and take action if there continues to be a significant disparity between the forecast supply and the actual number of homes delivered going forward,
Assuming that there continues to be significant levels of overestimation, the Government may wish to revise the national policy. The changes could include:
- Revise the definition of a deliverable site to require some degree of confidence in the deliverability of all sites.
- Increase the buffer that councils are required to build into their forecasts to better account for the homes that won’t materialise.
- Introduce a policy consequence for overestimation, which would serve to ensure that the deliverable supply is more realistic at the time it is assessed.
If you’d like to discuss how Pegasus can support your development, get in touch.
