🧮 Step-by-Step: How EHDC’s Annual Housing Need is Calculated

✅ Step 1: Get the Baseline from ONS

Use the latest household growth projections for your area (East Hampshire). These projections come from the Office for National Statistics (ONS), which estimates how many new households will form in each local authority area over time.

  • Look at the average annual household growth over a 10-year period.

🧾 Example (as of April 2025): ONS projects East Hampshire will grow by 3,678 households over 10 years → that’s 368 new households per year (baseline).

✅ Step 2: Apply the Affordability Uplift

If housing in the district is expensive compared to local earnings, the required housing number is increased.

🔍 What is the Affordability Benchmark?

The government uses a benchmark affordability ratio of 4.0, which assumes that housing is reasonably affordable if the median house price is no more than four times the median annual earnings in the area.

If the local affordability ratio is above 4.0, an uplift must be applied to the housing need to reflect increased demand caused by unaffordable housing.

💡 How the Uplift Works

For every 1.0 point above the benchmark of 4.0, the baseline housing need is increased by 0.25 (25%). This formula is set by the government in its Planning Practice Guidance (PPG).

🔎 What’s the Logic Behind the Benchmark of 4.0?

  • The 4.0 affordability ratio is a policy judgment: it reflects the idea that housing becomes unaffordable when it costs more than four times the average local salary.
  • Historically, house prices around 3–4× income were considered manageable by mortgage lenders.
  • The government uses 4.0 as a threshold where no uplift is applied — it’s the point where housing is just about affordable without overstretching buyers.

⚖️ If house prices are below 4× average income, housing is considered affordable enough, and no additional housing pressure needs to be factored into the council’s housing target.

📈 Why Apply a 25% Uplift per Point Above 4.0?

  • The uplift rate of 0.25 (25%) per point over 4.0 is meant to scale proportionally with housing stress.
  • For every 1.0 increase in the affordability ratio, the assumption is:
    • Demand exceeds supply
    • Additional homes are needed to cool price pressure

✅ Example: If the ratio is 5.0 (just one point over), the government assumes a 25% uplift is enough to help restore balance between supply and demand over time.

If it’s 13.0 (as in East Hampshire), the uplift becomes over 225% — because prices are so far detached from wages, the area needs a lot more housing just to stabilize affordability.

This method is intentionally simple and scalable. It avoids overcomplicated modelling and gives each council a clear formula based on just two data points.

✅ Example A: Affordable Area

If the affordability ratio is 4.0 or below, no uplift is applied.

✅ Example B: Unaffordable Area

If the affordability ratio is 13.03, as in East Hampshire:

Affordability ratio13.03
Affordability benchmark4
Above the benchmark of 4(13.03-4) = 9.03
Adjustment Factor = 25 % of the excess over the benchmark(0.25 * 9.03) = 2.2575
Baseline – Total projected new households (2024–2034)3,678
Baseline – Annual average growth3,678 ÷ 10 = 368 households/year
Affordability Adjustment (uplift)​+83 households per year
Total Annual Housing Need368 + 83 = 451 households/year

✅ Step 3: Cap It (In Some Cases)

  • If the Local Plan is up-to-date (reviewed within 5 years and aligned with national policy), the number can be capped to avoid sharp increases.
  • ⚠️ As of 2024, EHDC’s Local Plan is out of date, so no cap applies.

✅ Step 4: Use It for the 5-Year Supply

The final number becomes EHDC’s annual housing requirement.

  • To remain compliant, EHDC must show enough land for 5 years of housing need.
  • 💡 If need = 560 homes/year → EHDC must show land for 2,800 homes over 5 years.

📌 Where This Is Written

  • National Planning Policy Framework (NPPF) – Paragraphs 61–62
  • Planning Practice Guidance (PPG): Housing and Economic Needs Assessment

Annual housing need for East Hampshire District Council (EHDC) using the Standard Method as of April 2025

📍 Data Sources:

  • Data Source: ONS 2018-based household projections.
  • Affordability Data: Latest median house price to income ratio.

🧾 Key Definitions (Glossary)

  • ONS (Office for National Statistics) – UK government agency responsible for population and economic data.
  • Affordability Ratio – Ratio of median house price to median local earnings; used to assess how affordable housing is.
  • Standard Method – The formula councils must use to calculate annual housing need.
  • Local Plan – The council’s official planning document setting out what can be built and where.
  • 5-Year Housing Land Supply – A requirement for councils to show they have enough land available to meet 5 years of housing need.