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Newport, Torfaen and Monmouthshire Local Housing Market Assessment 2006

– Update 2010

Local Authority report for Torfaen DRAFT: June 2010

Torfaen Update Report 2010

Torfaen Update Report 2010................................................................................................................ 2

Project Overview .................................................................................................................................. 3

Local Housing Market Areas ................................................................................................................. 3

Reviewing the Modelling Analysis from 2006 ...................................................................................... 6

Changes Since 2007 .............................................................................................................................. 9

Updating Household Affordability: Housing Costs ............................................................................. 10

Housing Requirements and Household Projections ........................................................................... 14

Understanding the Required Housing Tenure Mix ............................................................................. 15

Sources of Supply ............................................................................................................................... 16

Modelling the Housing Market 2010: Unconstrained ........................................................................ 16

Modelling the Housing Market 2010: Constrained to Dwelling Delivery ........................................... 18

Torfaen Specific Modelling ................................................................................................................. 19

Torfaen Housing Market Areas........................................................................................................... 21

Project Overview

1 Opinion Research Services (ORS) were jointly commissioned in 2006 by Monmouthshire County

Council, Newport City Council and Torfaen Borough Council, and to undertake a local housing

assessment, including a comprehensive study of current and future housing requirements and housing

need. The assessment was undertaken to inform local policies, in particular relating to the housing

strategy and investment programme and planning policies surrounding affordable housing provision.

2 The Newport, Torfaen and Monmouthshire assessment was primarily based on the analysis of 5,100

interviews conducted with households across the sub-region. Secondary data from a range of other

sources also informed the analysis.

3 The housing requirements assessment was undertaken using the ORS Housing Market Model – which

was also the basis of the Greater London Housing Requirements Study completed by ORS, and which

has been used by numerous local authorities across the UK. The study exceeds the standards

promoted in all Government Good Practice publications and the model and it analysis has withstood

detailed scrutiny at numerous local planning inquiries.

4 This report summarises the key findings of the study for Torfaen, in particular where they relate to

existing policies or have implications for future policy decisions.

5 This document represents an update of the original study which considers the impact of the credit

crunch and slowdown in the housing market which has occurred since the original modelling was

undertaken. Where possible data is based on a reference point of March 2010, and this is the base

date for the study projections.

6 As with the original assessment, the update was undertaken using the ORS Housing Market Model. To

provide an analysis of the entire housing market, the ORS Model treats the housing market dynamically

by likening the interchange between households and vacancies to ‘musical chairs’. As some households

move, or suffer dissolution due to death, other households take up the released vacancies. The extent

to which the market clears depends on the match/mismatch between the households seeking housing,

on the one hand, and the available stock, on the other.

7 On the requirements (‘need’ and ‘demand’) side, the ORS Model takes account of established

households moving within the region, new household formations in the region, homeless and in-

migrant households, and also the ‘effectiveness’ of their demand. On the supply side, it takes account

of current and potential vacancies created by established households moving, household dissolutions

through death, and new provision.

8 The ORS Model matches gross housing requirements with supply (vacancies created) to identify the net

housing requirements. The identified net housing requirements have been broken down by household

size and tenure, and projections have been made to show how the situation is likely to change over the

current planning period.

Local Housing Market Areas

9 Local Housing Market Areas are defined as being the geographical area in which a substantial majority

of the employed population both live and work and where those moving house without changing

employment choose to stay.

10 To understand the operation of the housing market across the sub-region, the study sought to identify

the functional sub-markets operating within Newport, Torfaen and Monmouthshire. Housing markets

reflect where people both live and work, and typically represent the areas in which the majority of

residents will look for housing when they move. On the basis of migration and travel to work patterns

it is possible to divide the sub-region in functional sub-markets, where the majority of the local

population live, work and move within smaller geographic units.

11 To identify the functional sub-market areas, data about individual Census Output Areas (COAs) was

analysed. COAs with strong links in terms of migration (where a significant proportion of residents

from one COA moved to another COA) or strong links in terms of travel to work patterns (where a

significant proportion of the working population resident in one COA were employed in another COA)

were merged to form a single combined area. This process was then progressively repeated, with the

COAs with the strongest links to the combined area being identified and merged in turn.

12 At each stage of the process, the proportion of the working population who both lived and worked in

the combined area and the proportion of migrants that moved within the combined area were

reviewed to determine whether or not the identified area had reached an appropriate level of self-

containment. Once a reasonable level of self-containment had been achieved, the process was

repeated starting with a different pair of COAs with strong links – leading to a number of combined

geographies being identified across the sub-region.

13 Where the combined geographies overlapped (i.e. individual COAs had been merged into more than

one combined area) the relative strengths of the COA to each area were considered to determine an

appropriate boundary between the combined areas. Following on from this process, the strength of

links (in terms of migration and travel to work patterns) between the combined areas were considered

in order to identify any interdependencies, and where strong links clearly existed areas were merged

together.

Newport, Torfaen and Monmouthshire LHMA Update 2010 – Torfaen Report

Figure 1: Identifying the Newport, Torfaen and Monmouthshire Housing Market Areas Source: UK Census of Population 2001

14 Figure 1illustrates the outcome of the analysis, showing the seven housing sub-markets identified. The

7 HMAs identified above all interact with each other but can be thought of as separate entities that can

be distinguished from the other areas in Newport, Torfaen and Monmouthshire. Torfaen broadly

covers three separate HMAs – namely

Cwmbran – to the south of the County Borough;

Pontypool – in mid Torfaen; and

North Torfaen – to the north of the County Borough.

15 Figure 2 below shows the number of interviews which were conducted in each geographical area and

the number of these interviews which were conducted within Torfaen.

Figure 2: Interviews Conducted by Area Source: Newport, Torfaen and Monmouthshire Household Survey 2006

Area Total for Area Total within Torfaen

Primary Area

Whole Study Area 5,131 2,208

Local Authority

Torfaen 2,402 2,402

Housing Sub-Market Areas

Cwmbran 1178 1178

North Torfaen 457 457

Pontypool 662 662

Key Settlements

Abersychan urban 190 190

Blaenavon urban 150 150

Cwmbran urban 1006 1006

Pontypool Urban 544 544

Reviewing the Modelling Analysis from 2006

16 For any housing market assessment, the key or core issues are:

How many additional units are required?

How many additional units should be affordable homes?

For what type of open-market housing is there demand?

How will ‘demand’ and ‘need’ change over time?

17 The ORS Housing Market Model addresses these issues by analysing the whole housing market.

Instead of focusing only or primarily upon poorer households and social sector need, it interprets the

interaction of requirement and supply across all sectors of the housing market. Social sector needs are

interpreted within the context of market housing demands. This takes account of the interaction of

effective and ineffective demands and needs, and the likely supply from the range of properties

vacated within the existing stock.

18 The Model notionally assigns – or matches – available housing to households. Through matching

housing requirements with supply (vacancies created), the model identifies net housing requirements –

i.e. those households who are unlikely to find suitable housing within the existing housing stock.

19 The key stages of the model can be summarised as follows:


Housing Requirement = Established Households +

New Households +

In-migrant Households

Housing Supply = Established Households +

Household Dissolution +

Out-migrant Households

Net Housing Requirement = Gross Housing Requirement -

Housing Supply

Core Modelling Assumptions

Housing Requirements

Housing requirements are generated from three sources;

Existing households moving;

Newly forming households;

In-migrant households.

Existing household moves are based upon the expectation of moving in the next 12 months

Newly forming household and in-migrant households are both based upon trends from the previous 12 months.

Housing Supply

Housing supply is generated from three sources ;

Existing households moving;

Death and dissolutions;

In-migrant households.

Existing household moves are based upon the expectation of moving in the 12 months;

Deaths and dissolutions are based upon ONS mortality rates for deaths and trends over the previous 12 months for

households merging for dissolutions

Out-migrant households are based upon expectations of moving in the next 12 months.

Affordability

Households are allocated to tenures based upon affordability and not preference.

For owner occupation lending for single incomes assumed to be 3.5x the gross income and lending for joint incomes

based on a 2.9x multiplier. The assessment of affordability for owner occupation also includes:

Savings;

Debts;

Equity (positive or negative) from current home (for current owners).

Households are assumed to spend 25% of their gross income on rent

Households who can afford private rent are assumed to access this, rather than specialised intermediate housing

products

Households who can afford more than existing social rents , but cannot afford private rent are allocated to

intermediate housing

Households allocated to affordable housing are modelled to receive the number of bedrooms they will get under

Torfaen allocation rules

The lowest quartile of private rents is considered to form part of the existing supply of intermediate housing

because it fulfils the same role of meeting the needs of households in housing need

A household is in the backlog of need if they are unsuitably housed, require alternative housing provision in the

borough and cannot afford market housing. The Model addressed the backlog of need over 10 years.


20 Figure 3 details the net gains and

losses from migration and

indigenous change in Newport,

Torfaen and Monmouthshire,

where it is apparent that a net

7,438 additional dwellings were

required be provided over the 5-

year period commencing in August

2006. It should be noted that these

figures were constrained to equal

the apportioned planned delivery

targets of the sub-region at the

time of the study as set out by the

South East Wales Strategic Planning Group (SEWSPG).

21 Figure 4 details the net requirement for additional housing after the model has taken account of

vacancies arising within the existing stock. This shows the net requirement by type of housing and

number of bedrooms and therefore represents a summary of the identified housing requirements

across Newport, Torfaen and Monmouthshire from 2006.

22 It is apparent that there is a large net housing requirement is for 1-bed and 2-bed dwellings –

accounting for 7,396 new dwellings. It should also be remembered that the study identified a net

requirement of 4- bed dwellings, particularly in the market sector, and therefore care should be taken

when allowing conversions of dwellings of this size. However, there was a surplus of almost 3,000 3-

bed dwellings.

Figure 4 5-year Gross Housing Requirement by Housing Type and Size 2007 (Source: ORS Housing Market Model, Newport, Torfaen and Monmouthshire Local Housing Market Assessment 2006. Note: Figures may not sum due to rounding)

Housing Requirement

Type of Housing Total

Market Housing Intermediate Housing Social Rented Housing

5 – Year Requirement

1 bedroom 2,209 1,191 555 3,955

2 bedroom 1,757 (451) 2,135 3,441

3 bedroom (1,023) (917) (951) (2,890)

4 bedroom 1,488 971 128 2,587

5 bedroom 286 - 59 345

Total 4,718 (63.4%) 793 (10.7%) 1,927 (25.9%) 7,438

Changes Since 2007

23 Since the original study was undertaken huge changes have occurred in the economy and housing

market of the UK which have major implications for Newport, Torfaen and Monmouthshire, and the

local sub-market areas within it. We have taken this opportunity to update a wide range of indicators

to highlight how the housing market of Newport, Torfaen and Monmouthshire has changed since 2006.

The two main areas we have updated are Housing Affordability and Migration and these are explored

in more detail below. It should be noted that the ORS Housing Market Model is underwritten by house

prices and rents for the whole sub-region, but the income profile of households and migration trends

are considered for each local authority.

Figure 3 Summary of 5-Year Housing Requirements by Household Flows 2006 (Source: ORS Housing Market Model, Newport, Torfaen, Monmouthshire Local Housing Market Assessment. Note: Figures may not sum due to rounding)

Housing Type Inward

Flow Outward

Flow Net

Requirement

5-Year Requirement

Migration – households moving to and from Newport, Torfaen,

Monmouthshire 13,454 10,173 3,282

Indigenous change – household formations and dissolutions

11,257 7,101 4,156

Established household moves 34,320 34,320 -

Total 59,032 51,594 7,438

24 It should also be noted that we have updated a number of other factors in the Housing Market Model.

These include the number of households in temporary accommodation who require being re-housed

and the projected number of vacancies generated through the death of all household members.

However, these changes have had only a minor impact on the results and we will concentrate on the

issues which have changed more dramatically.

Updating Household Affordability: Housing Costs

25 In considering future housing need and demand, it is important to consider how housing affordability

has changed since the time of the original study.

26 Assessing affordability is critical to determining whether or not households can afford local housing.

Whilst affordability can be assessed in a number of different ways, each method depends on common

factors that are crucial to the analysis – the affordability of any particular household will depend on the

relationship between:

The cost of appropriate local housing, and

The amount that the household is able to afford.

Local House Price Trends

27 Figure 5 shows the average property prices in

Newport, Torfaen and Monmouthshire as a sub-

region and for Torfaen independently for each

quarter from the first quarter of 2000 until the

last quarter of 2009. It should also be noted

that discounted local authority properties

bought under ‘right-to-buy’ are not included in

the statistics.

28 The house price information is drawn from the

Land Registry, as this is widely recognised as the

only fully comprehensive source of reliable

information about property sales in England and

Wales. This shows that in the sub-region and in

Torfaen house prices are currently around the

same level as they were during the baseline

period for the 2006 study of quarter 3 2006.

However this follows an initial increase of

around 13% to quarter 3 2007 and a subsequent

fall in house prices.

29 Beyond looking at the obvious measure of a

housing market – i.e. the prices at which

properties are sold – it is also worth exploring

the volume and composition of sales, for this

can tell us more about the dynamics of the

housing market. Figure 6 shows the volume of

annual property sales since 2000. It is apparent

that the number of completions increased after

Figure 5 Average Price of Properties Sold in Newport, Monmouthshire and Torfaen: Q1 2000-Q4 2009 (Source: HM Land Registry)

Figure 6 Volume of Properties Sold Annually in Torfaen: Q1 2000-Q4 2009 (Source: HM Land Registry. Note: Figures show rolling annual total based on quarterly data)


2006 to a high in late 2007/early 2008 before falling again and they now sit at around 45% of the level

they were at in the third quarter of 2006.

30 Property prices in Wales have changed rapidly

in recent years. Figure 7 illustrates how the

distribution of property prices has changed in

Torfaen. In early 2000, over 80% of all

completed property sales were priced at less

than £80,000. This figure was below 20% of all

sales from 2005 onwards. Conversely the

number of properties selling for over £150,000

has risen from less than 1% to almost 30% of

the total. Since 2008 the number of properties

selling for less than a particular price band has

begun to rise again, however many properties

are still currently beyond the reach of some first

time buyers.

31 Another measure highlighting the conditions to

be found in the housing market is mortgage

repossessions. Figure 8 shows that mortgage repossessions grew in Torfaen between 2000 and 2008,

but fell in 2009. While unemployment rates have been rising since 2008, which may have been

expected to be associated with higher levels of repossessions, it is also the case that interest rates have

been at historic low levels and government and mortgage lender backed schemes have sought to limit

the number of properties which are repossessed.

Figure 8 Mortgage Repossessions in Torfaen 2000-2009 (Source: Department of Justice)

0

50

100

150

200

250

300

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Figure 7 Average Price of Properties Sold in Torfaen: Q1 2000-Q4 2009 (Source: HM Land Registry)

Cost of Local Housing by Property Size

32 By using the information published by the Land Registry in combination with the information from the

household survey the lowest quartile purchase prices for properties of different sizes were calculated in

2006. These represented the threshold prices which households were required to be able to afford

before they could purchase a property.

Figure 9 Newport, Torfaen and Monmouthshire Property Prices for Owner Occupation by Property Size 2006 and 2010 (Source: Computed based on HM Land Registry 2009 and Newport, Torfaen and Monmouthshire Household Survey 2006)

Property Size Lowest Quartile 2006 Average Price 2006 Lowest Quartile 2009 Average Price 2009

1 bedroom £80,000 £105,000 £74,995 £95,300

2 bedrooms £85,000 £115,600 £80,000 £109,200

3 bedrooms £105,000 £139,600 £101,000 £137,800

4 bedrooms £180,000 £231,700 £175,000 £236,400

5+ bedrooms £220,000 £327,600 £215,000 £358,600

Cost of Social Rented Housing

33 For this study we have updated the average social rents which were charged in 2008/09. Private rent

thresholds are based on those which were obtained from the 2006 survey of letting agents with a

survey of current properties for rent in the sub-region indicating that rent had not substantially

changed.

Figure 10 Newport, Torfaen and Monmouthshire Weekly rent by Property Size and Tenure 2009(Source 1: Welsh Housing Statistics 2008. Source 2: Survey of Letting Agents in Newport, Torfaen and Monmouthshire)

Property Size Average RSL Rent

(Torfaen) Lower Quartile Private Rent

Bedsit/1 bedroom 59.93 86.49

2 bedrooms 63.08 101.93

3 bedrooms 65.97 118.00

4+ bedrooms 68.53 183.24

Income, Savings and Debts

34 While house prices have changed since 2006, it is also the case that the amount households can afford

to spend on housing will have also changed in this time. For this update we have increased all incomes,

savings and debts by 9.4% in line with changes in the RPI index since August 2006.

Migration

35 Torfaen has seen some small changes in its migration patterns since 2001. Figure 11 and Figure 12

highlight that both in-migration and out-migration have fluctuated over the years with the local

authority experiencing both net in and out migrations year by year. In 2000 the authority experienced a

small net out-migration of 60 people, while in 2002 this had become a net in-migration of 90 people. By

2008 out-migration slightly outnumbered in-migration giving a net out-migration of 130 people.


Figure 11 Migration to and from Torfaen 2001-2008 by Year (Source: ONS Migration Statistics Unit)

Figure 12 Net Migration to Torfaen 2001-2008 by Year (Source: ONS Migration Statistics Unit)

36 Figure 13 highlights recent migration trends between Torfaen and the rest of the sub-region. Torfaen

gains migrant persons of all ages from Newport, but loses them to Monmouthshire. Torfaen does gain

a small number of young adults aged 16-24 years from Monmouthshire, but loses children and adults

over 25 years.

0

200

400

600

800

1000

1200

1400

1600

1800

2000 2001 2002 2003 2004 2005 2006 2007 2008

In-migrants Out-migrants

-250

-200

-150

-100

-50

0

50

100

150

1999 2000 2001 2002 2003 2004 2005 2006 2007

Figure 13 Torfaen’s Migration to and from Monmouthshire and Newport by Age Group 2003-2008 by Year (Source: ONS Migration Statistics Unit)

Age Group Monmouthshire Newport Total

In Migrants

0-15 years 170 690 860

16-24 years 160 480 640

25-44 years 380 1,110 1,490

45-64 years 200 430 630

65+ years 80 270 350

Total 990 2,980 3970

Out Migrants 0-15 years 300 530 830

16-24 years 140 420 560

25-44 years 440 910 1,350

45-64 years 280 330 610

65+ years 100 110 210

Total 1,260 2,300 3560

Net Migrants 0-15 years (130) 160 30

16-24 years 20 60 80

25-44 years (60) 200 140

45-64 years (80) 100 20

65+ years (20) 160 140

Total (270) 680 410

37 For the purposes of the modelling update we have updated the base migration assumptions to account

for new data available since 2006. We have also sensitivity tested the results by considering different

dwelling delivery rates in the future, which will impact upon migration trends.

Housing Requirements and Household Projections

38 Before discussing the updated ORS Housing Market Modelling results, it is worthwhile to firstly

understand the meaning of the results and also how they compare with household projections.

39 2006 based household projections from Welsh Assembly Government indicate that Torfaen is projected

to grow by 5,200 households from 2006-2031, while Monmouthshire is projected to grow by 11,000

households and Newport to grow by 14,700 households in the same time period. Across the whole

sub-region, this equates to 30,900 households across the sub-region or 1,236 households per annum.

This would give a 5 year projected household growth of 6,180 across the sub-region.

40 The Welsh Assembly Government household projections are derived from trend information relating to

births, deaths, migration and household membership rates. A key issue in household projection is that

they can be circular in their logic with areas which have high levels of development attracting many in-

migrants which leads to future projections identifying the area as one with high levels of growth. The

converse also applies to areas with little recent development, where low levels of population and

household growth are projected into the future.

41 The ORS Housing Market Model operates on similar trend based information to household projections.

However, rather than looking at population based trends, the ORS Housing Market Model analyses

trends directly at the level of households. Therefore, the model directly analyses household formation,

dissolution and migration. The model also includes an element of expectations within it which are not


to be found in household projections. Future moves by households are underwritten by both trend

level information on migration and also expectations of moving. Therefore, the model allows for

household movements which would not be detected through just trend based information.

42 In summary both household projections and the ORS Housing Market Model utilise trend information

to project the number of households who will be requiring housing in the future. However, the ORS

Housing Market Model operates directly at household level and also includes elements of expectations

as well as trend. Therefore, it is natural that the outputs of the ORS Housing Market Model do not

directly equate to those from population trend based household projections such as those produced by

the Welsh Assembly Government.

Understanding the Required Housing Tenure Mix

43 Affordability tests are used to apportion households to specific housing tenures;

Social rented housing – for those households unable to afford any more than social rents;

Intermediate housing – for those households able to afford more than social rents, but unable

to afford to buy owner-occupied housing or to rent privately at the market rent threshold; and

Market housing – for those households able to afford to buy owner-occupied housing or able

to afford to rent privately at rents at or above the market rent threshold.

44 The requirement for housing is therefore defined purely on affordability grounds with those who have

incomes above market housing thresholds being identified as requiring market housing. It is also the

case that those with incomes below market housing thresholds who report no difficulties with their

housing costs are also identified as requiring market housing because using the TAN2 definition;

Housing need is households who are lacking their own housing or who are living in housing

which is judged to be inadequate or unsuitable, who are unlikely to be able to meet their own

housing needs in the market without some financial assistance.

45 On this basis households meeting their own housing requirements in the market are deemed to be

suitably housed, do not require financial assistance and are not in housing need.

46 Nevertheless, whilst TAN2 defines intermediate housing as being for those households able to afford

more than social rents but less than market housing (rent or owner occupation), it should be

recognised that it may not be possible to deliver intermediate affordable housing affordable to those

households only able to afford fractionally more than a social rent.

47 As an illustration of the importance of this distinction, Figure 14 highlights the level of household

income necessary to afford particular tenures. This shows that any household with an income of more

than £12,500 per annum requiring a 1-bed dwelling can afford more than a social rent in Torfaen.

Figure 14 also shows that the household income necessary to afford lower quartile market rents for 1

bedroom dwellings is £18,000, so any household who has an income above £18,000 is assessed as

requiring market housing in the Monmouthshire, Newport and Torfaen sub-region. This implies that,

following TAN2 definitions, intermediate affordable housing is required for any household requiring a

1-bed dwelling which has a household income of £12,500 to £18,000 and it is also assumed that these

households do not receive housing benefit to subsidise their rent.

48 For households without equity, typically first time buyers, it is assessed that a household income of

£21,400 is necessary to be able to afford a 1 bed owner occupied dwelling in Monmouthshire, Newport

and Torfaen sub-region. Therefore, any household who has an income of between £18,000 and

£21,400 is assessed as being able to afford market rent, but not owner occupation. These households

may potentially be able to afford some form of shared ownership product, but under TAN2 definition

this would be considered by the model as meeting part of the market housing requirement. TAN2

regards private rented housing above market rent thresholds and owner occupied housing as market

housing. Similar calculations have been made for dwellings of different sizes.

Figure 14 Annual Household Income Required for Dwellings by Tenure for Monmouthshire, Newport and Torfaen (Source: Welsh Housing Statistics 2009, Survey of Advertised properties 2006 and 2010 and Land Registry Records January 2009-December 2010)

Housing Type Target Social Rents Lowest Quartile Market Rent Lowest Quartile Owner Occupation

Bedroom Size

1-Bed £12,500 £18,000 £21,400

2-Bed £13,100 £21,200 £22,900

3-Bed £13,700 £24,500 £28,900

4-Bed £14,300 £38.100 £50,000

Sources of Supply

49 The supply of housing within each tenure can be measured differently according to different

assumptions. For social housing it is possible to consider the supply to comprise of dedicated supply

such as Council and RSL lettings but also housing benefit supported private rented dwellings. The

rationale for this is to recall the TAN2 definition of households in housing need and the requirement for

some form of financial assistance within the definition.

50 Housing benefit supported private rent does not have the same tenancy rights as full social rent, but

can be considered to contribute to social housing supply in that it is affordable to households who

require social housing. In practical terms there is a shortage of social rented housing and households

unable to access it will seek housing in the private rented sector with housing benefit support.

Therefore, any housing benefit supported private rent dwelling is considered to be part of the effective

social housing supply in some subsequent tables.

51 Similarly further supply assumptions can be considered for intermediate affordable housing. The

current supply of dedicated low cost home ownership and intermediate rent products in

Monmouthshire, Newport and Torfaen as defined by TAN2 is relatively small. However, Newport in

particular has a significant private rented sector. While not enjoying the same tenancy or ownership

rights as dedicated intermediate affordable housing products, cheaper (lower quartile) private rented

properties can be assumed to be affordable to households within the intermediate affordable housing

income band and be counted as part of the supply to this group of households. Therefore, any dwelling

in the lower quartile private rented sector is assumed to form part of the effective intermediate

housing supply.

Modelling the Housing Market 2010: Unconstrained

52 After apply the updates to affordability, migration, deaths and households in temporary

accommodation the projected flows of housing need, demand and supply are summarised below. This

includes all elements of housing need, demand and a supply. The ORS Housing Market Model

identified an overall requirement for 4,482 additional dwellings over a 5-year period. By matching the

total housing requirement (including both housing need and demand) against the corresponding row


totals for housing supply, it is possible to consider the overall net housing requirement for Newport,

Torfaen and Monmouthshire.

53 It is important to emphasise that these figures are based:

Purely upon the affordability of households, not their preferences or the affordable housing

allocation policies of the sub-region’s Councils;

In the affordable housing sector the number of bedrooms allocated to a households is based

upon the bedroom standard as set out in the 2004 Housing Act;

The future supply of intermediate housing includes the lower quartile of the private rented

sector;

54 In summary, the ORS Housing Market Model identifies an overall five-year requirement for 4,500

additional dwellings, with the balance between market housing, intermediate housing and social

housing being 65:1:34 respectively.

55 It should be noted that all results presented in this section related to 5 year projections. However, due

to the backlog of need being solved over 10 years, a 10 year projection can be obtained by simply

doubling the 5 year projection.

Figure 15 Summary of 5-Year Housing Requirements by Housing Type 2010 (Source: ORS Housing Market Model, Newport, Torfaen and Monmouthshire Housing Requirement Assessment Update 2010. Note: Figures may not sum due to rounding)

Housing Type Gross Housing Requirement

Housing Supply

Net Housing Requirement (Surplus)

N %

5-Year Requirement

Market Housing 36,365 33,428 2,937 65.5%

Intermediate Housing 3,083 3,053 30 0.7%

Social Rented Housing 16,885 15,371 1,514 33.8%

Total 56,332 51,852 4,482 100.0%

56 Figure 16 identifies the gross requirement for housing over the next five years in terms of housing type

and size. This shows that only 3,100 households are identified as requiring intermediate housing on

purely affordability criteria.

Figure 16 5-year Gross Housing Requirement by Housing Type and Size 2010 (Source ORS Housing Market Model, Newport, Torfaen and Monmouthshire Housing Requirement Assessment Update 2010. Note: Figures may not sum due to rounding)

Housing Requirement



5-year Gross Requirement

1 bedroom 3,639 1,511 5,599 10,749

2 bedrooms 9,685 359 7,155 17,199

3 bedrooms 14,563 487 3,661 18,710

4+ bedrooms 8,478 725 469 9,672

Total 36,365 3,083 16,884 56,331

Profiling the Net Housing Requirement

57 Figure 17 details the net requirement for additional housing after the model has taken account of

vacancies arising within the existing stock. This shows the net requirement for each tenure of housing

by bedroom size and therefore represents a summary of the identified housing requirements for

Newport, Torfaen and Monmouthshire.

Figure 17 5-year Net Housing Requirement by Housing Type and Size 2010 (Source: ORS Housing Market Model, Newport, Torfaen and Monmouthshire Housing Requirement Assessment Update 2010. Note: Figures may not sum due to rounding)

Housing Requirement



5-year Net Requirement

1 bedroom 2,032 859 412 3,304

2 bedrooms 1,571 (547) 1,974 2,998

3 bedrooms (1,903) (1,008) (1,156) (4,067)

4+ bedrooms 1,238 725 283 2,246

Total 2,938 30 1,514 4,482

58 It is apparent that much of the net housing requirement is for 1-bed and 2-bed dwellings – accounting

for 6,302 of the overall requirement. However, it should also be remembered that the study identified

a large net requirement for 4 bed dwellings, particularly in the market sector, and therefore care

should be taken when allowing conversions of dwellings of this size.

59 It is also noteworthy that the identified net requirement shows a surplus of 3 bed dwellings in Newport,

Torfaen and Monmouthshire. While Figure 16 shows that 33% of the gross requirement is for dwellings

with 3 bedrooms, the supply projected to occur is more than the requirement. The identified surplus

reflects more dwellings expected to becoming available than are required. This in turn reflects the

impact of the changing nature of households and declining household sizes implying that fewer

households require 3 bedroom dwellings.

60 Much of the expected supply of 3 bed dwellings, particularly, in the social sector, is from households

who are technically under-occupying their dwelling. Many of these households are older persons or

couples who potentially could move to smaller dwellings. However, if suitable smaller dwellings are

not available for them they are likely to remain in their current dwelling and thus will not create the

expected supply of 3 bedroom dwellings.

Modelling the Housing Market 2010: Constrained to Dwelling Delivery

61 As noted earlier, the model produced in 2006 was constrained to the then dwelling delivery targets of

each of the authorities. These equated to 7,438 dwellings over 5 years in the sub-region. Since this

time the planned dwelling deliver targets of the local authorities have changed. The current planned

dwelling delivery for Monmouthshire is 350 per annum, Torfaen is 400 per annum and Newport is 640

per annum in the period 2011-2021.

62 This implies that the annual dwelling delivery across the sub-region will be 1,390 units per annum or

6,950 over 5 years. This implies that dwelling delivery is projected to be over 2,000 higher than trend

based projections indicate are necessary. It has been assumed that the extra 2,000 households will

come from additional in-migration to the sub-region.

63 Figure 17 details the net requirement for each tenure of housing by bedroom size and therefore

represents a summary of the identified housing requirements for Newport, Torfaen and

Monmouthshire when constrained to dwelling delivery.


Figure 18 5-year Net Housing Requirement by Housing Type and Size 2010 (Source: ORS Housing Market Model, Newport, Torfaen and Monmouthshire Housing Requirement Assessment Update 2010. Note: Figures may not sum due to rounding)

Housing Requirement



5-year Net Requirement

1 bedroom 2,196 951 531 3,677

2 bedrooms 2,035 (547) 2,114 3,603

3 bedrooms (1,172) (1,008) (968) (3,148)

4+ bedrooms 1,686 849 283 2,818

Total 4,745 245 1,960 6,950

64 The consequence of this change is to see the requirement for 1-bed, 2-bed and 4+ bed dwellings rise,

while the surplus of 3-bed dwellings falls. The ORS Housing Market Model identifies the balance

between market housing, intermediate housing and social housing being 68:4:28 respectively.

65 This compares with a requirement from the 2006 study of 7,396 new dwellings with the balance


Therefore, the requirement for social rented housing has risen slightly as a share the total requirement.

66 However, the main change has been an increase in market housing requirement and a decline in the

intermediate requirement. This is principally due to incomes having risen slightly since 2006, but

market rent not having moved significantly. This has allowed slightly more households to be able to

afford to access market rents. In practice it is important to note that some households within the

market housing sector will create a demand for intermediate housing products – where in principle

they could afford market rented housing but would prefer to buy their home. This is particularly true at

the time of writing this report. In this context, the actual demand for intermediate housing products is

likely to be stronger than the model would suggest in the context of a needs-based assessment – but

such demand is in addition to the affordable housing need already identified.

Torfaen Specific Modelling

67 The results to this point have concentrated upon the sub-region. While it may be legitimate to argue

that the study was undertaken on a sub-regional basis and that needs should also be apportioned on a

sub-regional basis, it is also possible to analyse the requirements of each local authority in isolation.

68 This analysis is undertaken below for Torfaen, using both the constrained and unconstrained figures.

For the unconstrained housing requirements the ORS Housing Market Model identifies the balance


Figure 19 5-year Net Housing Requirement for Torfaen Unconstrained (Source: ORS Housing Market Model, Newport, Torfaen and Monmouthshire Housing Requirement Assessment Update 2010. Note: Figures may not sum due to rounding)

Housing Requirement



Housing Requirement 9,652 871 5,611 16,135

Housing Supply 9,016 586 4,992 14,594

Net Requirement 636 285 619 1,540

69 For the constrained housing requirements the ORS Housing Market Model identifies the balance

between market housing, intermediate housing and social housing being 49:16:35 respectively. Please

note that the total build does not exactly sum to the dwelling delivery target for Torfaen of 2,000 due

to the figure representing a break-out from the sub-regional position.

Figure 20 5-year Net Housing Requirement for Torfaen Constrained to Delivery Target (Source: ORS Housing Market Model, Newport, Torfaen and Monmouthshire Housing Requirement Assessment Update 2010. Note: Figures may not sum due to rounding)

Housing Requirement



Housing Requirement 10,071 932 5,746 16,750

Housing Supply 9,016 586 4,992 14,594

Net Requirement 1,055 346 754 2,156

70 The key to understanding the results presented above are that they are not a newbuild housing target,

but instead represent projected changes to the housing market of Torfaen if currently trends continue.

The second hand stock of Torfaen is projected to absorb any changes which are not meet through

newbuild completions.

71 The key point to understand in this calculation is the implications from not delivering the identified

requirements. If the 754 units of social rented dwellings are not provided, the households who are

identified as requiring to occupy these properties will have to find alternative accommodation. The

most obvious conclusion from not being able to deliver the 754 units of social rent is that housing

benefit in the private rented sector will rise and also that some households will be forced to spend very

high shares of their income to find accommodation in the private rented sector.

72 It should also be noted that whilst TAN2 defines intermediate housing as being for those households

able to afford more than social rents but less than market housing, it should be recognised that it may

not be possible to deliver intermediate affordable housing affordable to those households only able to

afford fractionally more than a social rent. On this basis, many of the households who are identified in

the model as requiring intermediate affordable housing may only be able to have their housing needs

met in social housing because of a limited range of intermediate housing products.

73 The intermediate affordable housing requirement represents the shortfall which is likely to exist

between households requiring intermediate affordable housing and the supply of genuine intermediate

housing products plus the lower quartile of the private rented sector. If the dwellings cannot be

provided, the households will again be forced to seek alternative accommodation. This could include

paying more than they can afford for market rent units or seeking social rented housing.

74 As noted earlier, the model assumes households who can afford market rents in the sub-region will

access this form of tenure and not intermediate affordable housing. This is based on the very narrow

definition of intermediate affordable housing set out in TAN2. This does not imply that there is no case

for providing intermediate housing to higher earning households in Torfaen. The Welsh Assembly

national strategy of ‘Better Homes for People in Wales’ aims “To ensure everyone in Wales has the

opportunity to live in good quality affordable housing and to be able to choose where they live and

whether buying or renting is best for themselves and their families”. Therefore, households who can

technically have their housing requirements met in the private rented sector may wish to access

intermediate housing products if they are available.


75 The market housing requirement does not represent the requirement for new build housing. Instead, it

represents the number of units which market housing could potentially increase by in the next 5 years

in Torfaen. The distinction between these two points can be illustrated by a simple example.

76 Taking a scenario where a newbuild dwelling is bought by a household who are currently occupying an

existing owner occupied property in Torfaen, the key question is what happens to the dwelling they

vacate. If it is bought by another household who occupy the dwelling the total market housing stock

has been increased by one unit (the newbuild dwelling). However, if the dwelling is bought by a

landlord who subsequently rents the property to a household receiving housing benefit this effectively

becomes part of the affordable housing supply. Therefore, completing one newbuild dwelling can see

the market housing supply remain unchanged, but the affordable housing supply rise as part of the

second hand stock finds its way into the affordable housing sector.

77 This situation has been common in recent years as newbuild dwelling are occupied as market housing,

but parts of the second hand stock have been turned over to housing benefit receipt private rent or

sub-divided and let as lower quartile private rent. The implication is that while the market housing

requirement is identified does not necessarily equate to the newbuild market requirement. If more of

the second hand stock becomes part of the effective affordable supply then potentially more units of

newbuild could be required. However, if sufficient genuine affordable housing can be provided, units

of current effective affordable supply can be returned to the market sector: i.e. households could

vacate the lower quartile or housing benefit supported private rent and these dwelling could return to

being part of the market supply. However, this would require a provision of social and intermediate

housing of at least the level s identified in Figure 20.

78 A further complication occurs if a total of 2,156 dwelling are not provided in the next 5 years. The

households who wish to occupy these dwellings will still require to live somewhere. One possibility is

that properties within Torfaen will be sub-divided as households seek to live in smaller units to make

them affordable. Another possibility is that some households will seek housing outside the authority.

However, the most mobile households are those who can afford market housing, so it is these

households who are most likely to seek alternative areas to live in such as Blaenau Gwent. A further

possibility is that some households who wish to form separate households will fail to do so because of

lack of options, and this may see them continue to live in overcrowded conditions in their current

home.

79 Therefore, if the total housing requirement is not provided it is likely that either a sub-division of

properties will occur, households will seek to live in alternative areas, or households will fail to form. If

the affordable housing requirement is not provided then there is likely to be a complex result in the

market housing sector where parts of the current second hand market housing stock become units

within the effective affordable housing supply.

Torfaen Housing Market Areas

80 Figure 21 (below) details the housing requirement broken down by local housing market areas for

Torfaen. The results cover both the unconstrained model and the constrained to Torfaen dwelling

delivery model.

81 In terms of the distribution across the smaller areas detailed earlier in the report, the majority of the

requirement is in Cwmbran, though Pontypool also has a significant requirement. The North Torfaen

area has a far lower net requirement.

Figure 21 5-year Net Housing Requirement for Torfaen Housing Market Areas (Source: ORS Housing Market Model, Newport, Torfaen and Monmouthshire Housing Requirement Assessment Update 2010. Note: Figures may not sum due to rounding)

Housing Market Area Gross Housing Requirement

Housing Supply

Net Housing Requirement (Surplus)

Unconstrained

Cwmbran 8,278 7,577 701

Pontypool 5,480 4,830 650

North Torfaen 2,376 2,187 189

Total 16,135 14,594 1,540

Constrained to Torfaen Dwelling Delivery

Cwmbran 8,610 7577 1,033

Pontypool 5,660 4830 830

North Torfaen 2,480 2187 292

Total 16,750 14,594 2,156

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