Population, Housing and Employment Projections - Summary Paper and Assessment of Alternatives

Transcription

1 Population, Housing and Employment Projections - Summary Paper and Assessment of Alternatives Durham County Council April P a g e

2 1. Population, Housing and Employment Projections 1.1 It is well understood that both projections and forecasts depend on the assumptions made in relation to the key variables which underpin them. Further, the outcomes which they project represent a best fit estimate of a future state, based upon a given set of parameters rather than a firm prediction of what the future will look like. These outcomes help us understand the nature and impact of the significant driving forces affecting the emergence of developing population, housing and employment outcomes. 1.2 The wide range of housing and population projections submitted by house builders and their agents in response to the Pre-Submission draft of the County Durham Plan, some of which were developed using the same projection software, demonstrates the relationship between outcomes and the assumptions which underpin these. 2. Defining Projections and Forecasts 2.1 A projection is produced using data from before the specified forward date and assumes that the future can be based on past trends in numeric form. In this sense it sets out a tramline trend based upon data informed by the recent past A forecast also relates to the future. However, a forecast differs in that it can also point to an alternate future state based upon a series of policy changes (e.g. an anticipated increase of inward migration) and other policy based issues. These factors may act to produce either above, below, or on trend outcomes in the future. 2.3 The County Durham Plan has used both projections and forecasts to identify the baseline and trend outcomes in relation to population, housing and employment. 3. Assumptions 3.1 The key assumptions which underpin all projections and forecasts include: Population change through natural increase (the balance between births and deaths) Population change through migration (net UK migrants, net international migrants) Economic activity rates and employment rates Size of total labour force (resident) Unemployment rate Commuting ratio (number in employment number of jobs in an area) Vacancy ratio (ratio between household numbers and net new dwelling numbers) 4. Consistency and Currency of projections and forecasts 4.1 The Pre-Submission draft Plan used the industry recognised POPGROUP model to produce a housing requirement for County Durham. The outcomes from the modelling process have been applied consistently to inform all aspects of the planning process including the Strategic Housing Market Assessment (SHMA) P a g e

3 4.2 The Pre-Submission draft of the County Durham Plan has also been based on the most recent data and evidence available. In April 2013, ONS released re-calibrated mid-year population estimates for the period, which take account of the 2011 Census and have recalculated the components of change (specifically international migration) that have driven local population growth between the 2001 and 2011 Censuses. Also in April 2013, CLG released its 2011-based Sub-National Household Projections (SNHP) which are based on the 2011-based interim Sub-National Population Projections (SNPP) published by ONS in September The 2011-interim SNPP and SNHP suggest far lower annual housing requirements than the 2008 SNHP. 4.3 The 2011 Census showed that there had been substantial changes in the patterns of household formation in England in the first decade of the century. There were significant departures from previous long term trends and sizeable differences between what the Census found and what had been envisaged in the most recent previous official projections, including the CLG 2008-based household projections. In particular, the average household size in England did not fall between the 2001 and 2011 Censuses despite an ageing population. This was the first time in 100 years that average household size did not fall in England. 4.4 Durham County Council commissioned Edge Analytics to develop the employment and housing projections and forecasts contained in the Plan. The Edge Report (July 2013) did not advise using the 2011-based interim projections on their own as a robust direction of travel for housing growth, instead advising that the 2008-based SNHP and 2011-based SNHP be used conjunctively. This results in a set of scenarios which have adopted a midpoint housing growth trajectory between the 2008-based and 2011-based household formation rates. Planning on the basis of CLG 2011 household formation rate projections in isolation has also been questioned in two recent research papers one of which was published by the Royal Town Planning Institute (RTPI). 1 These papers raise the prospect that such an approach could lead to an under-provision of housing. 5. What changed? 5.1 Two reasons have been suggested for the changes in household formation rates: Increased international migration. New migrants to the UK tend to live in larger households than those who have been born here or have lived here longer. As a consequence, the more recent migrants there are in the population then, all other things being equal, the larger the average household size will be. Changes to household formation patterns amongst the rest of the population, including adult children living longer with their parents and more young adults living in shared accommodation. ONS data showed that 3.3 million adults between the ages of 20 and 34 were living with parents in 2013, 26% of that age group (ONS, January 2014) 1 Planning for Housing in England: Understanding Recent Changes in household formation rates and their implications for planning for housing in England. Neil McDonald and Peter Williams, University of Cambridge, RTPI Report Number 1. January, Also, Cambridge Centre for Housing and Planning Research, University of Cambridge - Choice of Assumptions in Forecasting Housing Requirements Methodological Notes, March P a g e

4 5.2 County Durham has experienced both of these changes with the 2011-based headship rates pointing to a decline in the number of families with dependent children and couples living with one or more other adults as declining over the period 2011 to Meanwhile, there is a projected increase in Other households (32.8% over the planning period). Other includes people living in shared accommodation and sharing facilities i.e. those living in shared flats and houses as many do when first leaving the parental home a much cheaper option than renting a flat on your own. The headship rate is consistent with more people in this age group living in such accommodation. This could be the result of either more people moving to shared houses or flats rather than individual accommodation or people spending longer in shared accommodation before moving on to a house or flat on their own. 5.3 It seems likely that the 2011 Census results were influenced by both the economic downturn along with the effects of poor housing affordability. As conditions in the housing market and the economy are forecast to improve there may be a return towards previous trends. 5.4 These factors confirm that planning on the basis of the latest (2011) projections could lead to an under-provision of housing. For this reason, we have modelled household formation rates in relation to both CLG s 2008 and 2011 household formation rates and set out a net new dwelling requirement as a mid-point between these two sets of projection rates. 6. International Migration 6.1 International migration flows have changed significantly over the last 20 years and could change again in either direction in the future as a result of world events or UK government policy changes. 6.2 In the absence of strong evidence that some exceptional event was responsible for a major distortion in the migration trends over recent years then it is prudent not to discount the element of household growth in County Durham that is driven by international migration. 6.3 Net migration to the UK rose to 182,000 in the year to June 2013, up from 167,000 in the previous 12 months (ONS, November 2013). 7. The Journey To Date 7.1 During two earlier rounds of consultation on the County Durham Plan, population, housing and employment forecasts were released based upon a range of published data and in-house modelling. Since then, 2011 Census data has been released. This significantly changed and updated our understanding with regard to population change and its components within County Durham. 8. Core Strategy Policy Directions Paper During 2011, Durham County Council published its Core Strategy Policy Directions paper. The housing requirement set out in the paper was calculated using the 2008 based ONS (Office for National Statistics) population and household projections. These predicted a population increase of 56,700 and household increase of 38,200 by P a g e

5 9. Preferred Options Paper In developing the Preferred Options Paper, the opportunity was taken to incorporate detailed assumptions around the population and household forecasts and to incorporate inhouse modelling and forecasting to make the ONS figures more appropriate to local circumstances. This work also linked the housing requirement to the economic growth ambitions for the County and was set out at the Preferred Options stage of the County Durham Plan. 9.2 The evidence produced to support the economic growth case during the second stage of the planning process was based upon 2009 population projections developed by Durham County Council s in-house forecasting team. The assumptions that underpin the ONS 2008 based household projections were then applied to arrive at future estimates of household numbers. 9.3 The in-house modelling work was subsequently linked to the economic ambitions set out in the evidence paper Defining Economic Growth in the County Durham Plan (March, 2012) which incorporated the 2009-based population projections produced by Durham County Council. Defining Economic Growth set out 5 different employment led scenarios for County Durham: Scenario Population Range for the Additional % Employment predicted by additional households rate by required by created by ,300 14,500-17,400 21, ,750 18,700-22,400 25, ,800 23,100-27,400 29, ,700 25,000-30,000 30, ,000 47,400-56,200 43, Scenario 4 was presented as the preferred scenario and this set out a revised housing requirement (30,000 net dwellings). 9.5 The analysis which underpinned the scenarios highlighted that there is not one single variable which can be adjusted to improve the County s economy. Rather, a number of interrelated variables need to be considered and promoted in conjunction. 10. Current Baseline Scenario 10.1 As stated earlier, at the Pre-Submission draft Plan stage we updated our population, household and employment forecasts using the latest demographic evidence using industry standard POPGROUP modelling software The baseline projection for County Durham sets out the potential future state of the County in relation to housing, employment and population in the event that the recent employment rate of 66% were to continue through to 2030 and with all other factors being equal. This scenario is set out in the context of an ageing population and, further, a stagnant working age population. The baseline projection shows the following set of population, housing and employment outcomes over the period : 5 P a g e

6 Population growth Population Households Households Net Migration Av per yr Net New New 47, % 22, % 2,265 1, ,459-3, This baseline projection shows that in the event that the economy of County Durham does not receive any positive impacts or policy led adjustments then there will be 3,266 fewer jobs in the economy by When the hollowing out of the labour force is viewed in conjunction with the fact that there is no guarantee that jobs vacated by the retired will be available to those seeking work during the period, as a result of a skills mismatch, this results in an unacceptable scenario. These projections are based on an employment rate of 66.3% reflecting the employment rate during the two years of flatline growth ( ). 11. Preferred Scenario 11.1 At the Pre-Submission draft consultation stage, Durham County Council released a revised set of population, housing and employment projections covering the plan period as part of its evidence base (Population, Housing and Employment Projection Paper, October 2013) To accompany the population and household forecasts, we developed a number of economic growth scenarios which evaluated potential changes to underlying rates of economic activity and associated employment rates and, further, to assess the demographic and housing implications of a 30,000 uplift in County Durham s labour force over a 20-year projection horizon Six scenarios were run including a baseline scenario with an employment rate at 66% (scenario 1) along with employment rates at 73% (scenario 2) and 72% (scenario 3). Scenarios 4, 5 and 6 modelled the same set of employment rates plus a labour force target of 30,000. Each scenario set out the projected population, migration, new jobs and net new dwellings implied by the employment rate (scenarios 1-3) and job uplift of 30,000 (scenarios 4-6) The projection work was undertaken in-house in relation to population and the components of population change, and externally, by Edge Analytics, in relation the housing and employment projections. Both aspects of the projections and forecasts used consistent data sets and POPGROUP software to project outcomes. The projection and forecasting work assessed how the different employment rates might affect future population, household and net new dwelling numbers both in isolation and, in conjunction with the 30,000 labour force growth target. The target of 30,000 jobs was developed during previous consultation rounds in the planning process which took into consideration both the need for existing residents of the County, who experience worklessness, to find routes to employment, and, to rebalance the economy, through the attraction of more highly skilled employment opportunities for migrants. Migrant employment refers to the employment of persons not previously resident in the County who have moved here for work Based on 2001 Census commuting rates the labour force growth target scenario associated with a 73% employment rate for County Durham residents highlights that 23,016 of the 30,000 additional labour force growth target will be located in County Durham. Unconfirmed commuting rate data from the 2011 Census Workday Population statistics suggests that commuting may have declined marginally to a ratio of 1.17 (from 1.19). In the 6 P a g e

7 event that this change is confirmed then 23,410 of the 30,000 additional jobs targeted will be located in County Durham. The preferred scenario is as follows: Preferred Scenario Employme nt rate 73% plus 30,000 jobs Population growth Population Househol ds Households Net Migration Av per yr Net New New Labour Force Growth Target 57, % 30, % 2,669 1,651 1,211 31,369 23,018 30, The Preferred scenario takes into consideration the following factors: The County must have a challenging target for economic growth to mitigate against further decline; Levels of net commuting should be taken into consideration when estimating both economic and housing need; 11.6 There should be a combined policy of a reduction of worklessness and inward investment of high value jobs; an injection of higher skilled employees would help businesses to expand or increase the propensity of businesses to locate here which in turn would lead to an increase in employment for County Durham residents who are currently not in work but also develop a more balanced labour market where career development and the sustainability of employment would be greater, especially for residents Additional jobs taken by County residents that are outside the County boundary should be seen as a positive aspect i.e. commuting is not seen as constant. Anyone taking up employment in the County who does not live here would not affect the growth aspirations set out as the focus is on resident employment levels and an increase in employment participation. 12. What Others Are Saying 12.1 A range of scenarios have been prepared by planning consultants and others acting on behalf of land owners, developers and lobby groups. These suggest that the number of net new dwellings required ranges from 20,000 to 55,366. A range of projection methodologies and software packages have been deployed to develop a fan chart of projected housing requirements. These include POPGROUP software and the Chelmer Housing and Population Model (see figure 1). 7 P a g e

8 Net Completions Fig. 1 Housing Projections - Fan Chart Average Durham County Council City of Durham Trust BWP NLP The explanation for the varying population, housing and employment outcomes lies in the varying assumptions made in relation to population growth, economic activity and employment rates, levels of net migration, commuting ratios, unemployment levels and vacancy rates. In developing projections Durham County Council has taken into consideration a wide range of potential scenarios associated with the variation of these input factors. Friends of the Durham Green Belt Friends of the Durham Green Belt Number of net Stance new dwellings Proposed 20,000 At the lower end of the spectrum the Friends of the Durham Green Belt have proposed a net new dwelling requirement of 20,000 dwellings as a better basis for planning than the County Council s artificially inflated figure of 31,400 (Objection and Case for Withdrawal of the Pre-Submission County Durham Local Plan, Friends of the Durham Green Belt, page 15, December 2013). Assessment 12.3 The precise method by which the figure of 20,000 is derived is unclear. However, it is likely that it based upon a simple division of projected population increase by average household size (baseline population growth 47,721 average household size 2.4 = 19,884) We have modelled the effects of delivering 20,000 net new dwellings upon migration levels, population growth and new jobs created in the context of the same POPGROUP software used to derive our mainstream scenario forecasts. On a like for like basis and in 8 P a g e

9 the context of our preferred scenario (73% employment rate), the following outcomes emerge: Preferred Scenario Employme nt rate 73% Population growth Population Househol ds Households Net Migration Av per yr Net New New % 19, % 1,474 1, ,000 10, The moderate growth scenario proposed by the Friends of the Durham Green Belt Group is, in reality, a scenario for significant decline. Under this scenario, population growth, annual net migration levels and new jobs fall by around 50%. The creation of 10,222 net new jobs in County Durham does not appear to meet the criteria for a credible growth strategy. Further, the moderate growth scenario only allows for the projected growth of the County s population to reach 542,900 by 2030 (a 5.8% increase). This level of population growth is significantly below the baseline growth projected using approved projection procedures and current data inputs. These show population growth to be 47,721 (9.3%) over the plan period. The scenario presented by the Friends of the Durham Green Belt therefore fails to account for projected baseline population growth to the extent of 17,800 people. This has additional negative knock-on impacts in relation to suppressing employment growth In the event that the moderate growth scenario was to be adopted then the County would be failing to plan to meet objectively assessed need. On this basis the proposal is unsound in planning terms. Moreover, when viewed in relation to the growth case advocated in the County Durham Plan, the moderate growth scenario falls still further short of enabling the delivery of this vision. Barton Wilmore - Chelmer Population and Housing Model Barton Wilmore Chelmer Model Number of net Stance new dwellings Proposed 41,080 To align with the aims of the County Durham Plan a minimum aspiration of a stable labour force should be targeted. In this context Barton Wilmore recommend the housing target should be increased to at least 2,054 dwellings per annum over 20 years (41,080 total). This represents a rise of 37% from the draft County Durham Plan target and would require average net in-migration of 2,335 people , considered highly realistic in the context of the recent short-term trend (2,800 people per annum). Three Chelmer scenarios are set out i) demographic-led ii) economic-led (higher migration) and, iii) dwelling-led. The economic-led scenario sets out a stable labour force over the plan period, achieved through higher net in-migration (2,316 per annum) and leads to the conclusion that 41,080 dwellings are required over the planning period. 9 P a g e

10 The representation from Barton Wilmore also suggests, incorrectly, that the approach of Durham County Council in setting the housing target of the draft County Durham Plan is fundamentally flawed, being based on out-of-date 2009-based Durham County Council projections. This is an inaccurate interpretation of the way in which DCC s projections have been developed. Assessment 12.6 Durham County Council has used the most recent population and migration data sets available from ONS sources, together with CLG household formation rates from both 2008 and 2011, and has modelled these through industry standard POPGROUP software. The starting point for the Barton Wilmore paper, which asserts that DCC projections are based upon 2009-based internal projections is an incorrect assumption and, therefore, it is difficult to engage in a meaningful response to the ensuing line of argument, based as it is, upon flawed assumptions. Barton Wilmore have used the earlier DCC paper (Defining Economic Growth in the County Durham Plan, March, 2012) as the starting point for their critique to deconstruct the County Council s projection case. In reality, DCC has updated its approach as outlined earlier in this paper. For example, Durham County Council s 2009-based population projections showed a total population of 494,323 in This compares with 513,200 people in 2011 as recorded by the 2011 Census. population in 2030 was subsequently projected to be 516,300 by Durham County Council s former 2009-based population projection. This is not dissimilar to the actual population in 2011 recorded by the Census. Nathaniel Lichfield and Partners - HEaDROOM Model NLP Number of net Stance new dwellings Proposed 55,366 The scenarios modelled through NLPs HEaDROOM framework endorse Durham County Council s identified requirement of 31,400 units over the plan period as a minimum housing requirement for the County. NLP suggest that this scenario, however, is forecast to result in 5,433 jobs created over the plan period, significantly below the economic aspirations of the emerging Local Plan. NLP have presented a jobs growth aspiration scenario (30,000 jobs) over the period which has an implied need for 55,366 new dwellings. Assessment 12.7 This analysis, by NLP, makes use of POPGROUP software to run a range of scenario alternatives with a good analysis of trend versus economic growth. The contrasts with DCC s analysis, derived using the same POPGROUP software application, relate to the choice of 10 P a g e

11 data inputs (jobs versus labour force targets) and the selection of key assumptions (headship rates, commuting ratios and economic activity rates) These factors, in combination, result in dwelling growth estimates for County Durham that are substantially higher than those implied by the County Council s preferred scenario position. The most significant discrepancy lies in DCC s application of a 30,000 labour force target through an uplift in the resident labour force (30,000) as opposed to a direct increase in the number of 30,000 new jobs within County Durham as featured in NLP s modelling process The growth scenario presented by NLP is extremely optimistic, relying as it does upon high levels of job creation and house building within the County. Moreover, when viewed in conjunction with the range of housing outcomes projected in the fan chart in figure 1 it can be seen that this outcome is an outlier at the high end of the projected range of likely outcomes. Significantly, the projected outcome bears little resemblance to the profile of delivery during the last decade and the level of uptick which it points toward contains a high level of optimism bias. 11 P a g e