Housing Need and Demand Assessment (HNDA) A Practitioners Guide (2026)

Chapter 4: Estimating Future Housing Need and Demand

Section 1: Introduction

Chapter Aim

4.1 To meet Core Output 2: “Estimate of future additional housing units”.

4.2 Broken into four tenures based on household’s likely ability to afford:

(a) owner occupation

(b) private sector

(c) below market rent

(d) social rent.

Please note: below market rent is Sometimes referred to as ‘Intermediate Rent’ or ‘Mid-Market Rent’.

4.3 To vary the above using to produce a range of demographic, economic and housing market scenarios.

Core Output 2

4.4 For robust and credible status HNDAs must satisfy all core outputs and processes, including core output two:

Estimate a Range of additional future housing units:

• Broken down into the number of households who are likely to afford owner occupation, private rent, below market rent, social rent.
• Estimates reported for each five year period of a 20 year projection and the cumulative total at the end of the 20 year projection (these are output automatically from the Tool.
• The geography chosen should fit with those required for the LHS and LDP.

Assumptions and choices made about scenarios (demographic, existing housing need, house price, income and affordability) used in the Tool must be based on evidence and clearly explained in the HNDA.

Section 2 – Content and Evidence Contents

4.6 This chapter uses the demographic and housing affordability evidence in chapter 2 to estimate of future number of additional housing units required to meet housing need/ demand. This combines an estimate of existing housing need and future additional households to produce a total additional housing estimate.

4.7 This chapter does not concern itself with existing housing need issues that can be dealt with using in-situ/ housing management solutions. These issues are dealt with in Chapter 3 on stock profile and Chapter 5 on Specialist Provision. This chapter does not deal with future changes in stock e.g. planned demolitions, planned new build, projected RTB, projected vacancies which Must be considered as part of the HST.

4.8 The estimate of future additional housing units is purely an arithmetic estimate based mainly on assumptions about future household formation, income, house and rent prices. This does not equate to the future amount of will realistically be delivered on the ground. This is determined in the HST.

4.9 The HNDA Tool has been developed to facilitate the process described in this chapter without excessive resource. There is no requirement to use the Tool, this is at the discretion of local and planning authorities. As part of core processes 3 and 4, for robust and credible status, this chapter must document the process used.

4.10 If the HNDA Tool is used then the HNDA must still, for the benefit of stakeholders, explain the process followed. In addition, the inputs to the Tool (the choices made within it), and the reasons for their selection, must be provided in order that results could be replicated.

4.11 In all cases the HNDA must document and explain the assumptions made and should produce a range of scenarios under different assumptions. The way in which the Tool works is also detailed as a schematic within the Tool.

4.12 This chapter should detail the following:

• evidence of choice of future demographic and housing affordability scenarios
• the total future estimate of additional housing units broken down into households’ likely ability to afford a) owner occupation b) private rent c) below market rent or d) social rent.

Please note - whilst below market rent does refer to the need for some form of subsidized private rent, it may also be viewed as a potential indicator of demand for alternative shared equity products that are used to support home ownership. As such, the HNDA results may suggest that Authorities should potentially consider further analysis on this.

Steps for Drafting This Chapter

4.13 The following steps are suggested and should be informed by the evidence in Chapter 2 on key housing market drivers and should be agreed with the HMP:

Step 1 - choose a range of future demographic scenarios that best reflect what may occur in local HMAs

Step 2 - estimate the number of households in existing housing need that will require a new home and decide how many years it will take to clear/ address this housing need

Step 3 - choose a range of scenarios which best reflect what may happen to future local house prices (new build and re-sales), rent prices and incomes

Step 4 - use affordability assumptions to split total additional housing units by tenure i.e. likely to afford to owner occupation, private rent, below market rent or social housing

Step 5 - consider how the Tool estimates will inform housing policy (LHS) and planning decisions (LDP) in the key issues table.

4.14 The purpose of this chapter is to produce estimates of future additional housing units by tenure. A range of estimates (for example high, medium and low) should be produced based on different demographic, economic or affordability scenarios. A preferred/most likely scenario could be indicated. HNDA users find it helpful to show all scenarios and tool settings in a single table. A good example of this can be found in South Ayrshire’s HNDA (table 2, page 71).

4.15 The Tool outputs estimates year-by-year, at time intervals and cumulative totals at the end of the projection period. Further guidance on using the HNDA Tool as described below is set out in the HNDA Tool Instructions.

Step A - Choice of future demographic scenarios

4.16 In this step, the choice of future demographic scenarios should be made and explained. The CHMA strongly recommends the use of the National Records of Scotland (NRS) household projections as these are the official source, are robust and the production of in-house projections is very resource intensive. However authorities are free to use their own estimates. If the NRS household projections are used then the HNDA should discuss and justify the choice of projection used i.e. (principal, high or low. The HNDA Tool contains the NRS principal and variant projections and has the ability to vary them if required.

4.17 If the NRS household projections are adjusted, or customized household projections are used, then there must be justification of the reasoning for this and a comprehensive discussion of the methodology used.

Step B - Estimate of existing housing need for additional housing units and the period in which it will be cleared/ addressed

4.18 In this step an estimate of the existing housing need for additional housing units should be made. This estimate must represent the need for additional homes and not in-situ or stock management issues which are addressed separately in Chapters 3 and 5 of the HNDA.

4.19 The HNDA Tool contains measure of existing housing need which includes a count of homelessness households in temporary accommodation and households that are both overcrowded and concealed families (HoTOC). This is a minimum count of existing housing need only. Local authorities may use HoTOC as a starting point, however there is an expectation that other items will be added such as care and support needs, poor quality housing etc. Equally, local authorities can decide not to use HoTOC and estimate their own existing housing need figure in full. However, the rationale for either approach must be set out in the HNDA write-up. Items that can be included in existing housing are shown below (this list is not exhaustive);

• homeless households (live homelessness applications, which also includes those in temporary accommodation)
• overcrowded households (using the Bedroom Standard - if the number of people sleeping in the house and the number of rooms available as sleeping accommodation (that is rooms normally used in the locality as a bedroom or living room) mean that two people of the opposite sex have to sleep in the same room then the accommodation will be overcrowded)
• concealed families (a household with more than one family, for example, George and Amy live at the same address as their daughter Emily and her husband and daughter. Because Emily is not a dependent child and has her own family, there are two families in this household).
• care and support needs (where the existing housing stock cannot be adapted to meet these needs and only a new build can deliver this)
• poor quality housing (where a property is Below Tolerable Standard)

4.20 Existing housing need equates to households who need a new unit of housing because the current stock cannot meet that need. This choice needs to be explained in the HNDA. The Tool is set to clear existing housing need in 5 years but this can be changed. One way in which to evidence this is to analyse how much social housing has been delivered over the past 5 or 10 years in order to see if it is likely that an authority can clear the need over 5 years or will need longer. The HoTOC count is based on Scottish Government homelessness statistics (a count of homeless households in temporary accommodation) and a combination of the Scottish Household Survey (2016-18) and the 2011 Census (a counted of households both overcrowded and concealed).

4.21 Consideration should be given as to whether the estimates of existing housing need are solely about social housing or whether they extend to private/ market housing. If it is all tenure then the estimates should be processed through the Tool’s affordability model (Step 4) built which splits the additional need across all four tenures.

Step C - Choice of future house price and income scenarios

4.22 Authorities should next decide on assumptions for growth in house prices and household income. These assumptions are projected forward for the planning period and the HNDA Tool does this. Past trends are often a good predictor of future trends.

4.23 It is recommended that a number of scenarios are chosen based around a central case which is considered “most likely”. Scenarios should be fully considered by the HMP and be determined by the analysis undertaken in Chapter 2 and appropriately informed by consultation. This should be written-up in the HNDA.

4.24 Scenarios are provided within the HNDA Tool. The tool has been set with default scenarios but these can be altered by users to better reflect local circumstances or users may enter their own scenarios.

Step D – Use of affordability assumptions to split total additional housing by tenure

4.25 In this stage the total additional housing estimate is split into households likely to afford owner occupation, private rent, below market rent or social rent. The Tool is set up to do this.

4.26 The first assumption made about affordability is that a house is affordable to purchase if its price does not exceed 3.7 times a household’s income. The Tool focuses on lower quartile priced properties and lower quartile incomes because, it is assumed, that this point in the price-income distribution 3.7 times represents First-Time-Buyers (rather than movers) who are in most housing need.

4.27 The use of a 3.9 times income multiple to house price is broadly equivalent to a 3.1x mortgage with a 17% deposit. Practitioners may wish to vary this assumption.

4.28 The next step is to make an assumption about the proportion who are able to purchase who actually go on to do so. This relates (assumes) a wealth affordability constraint. The CHMA suggest a starting point of 65% of households i.e. of those households who could afford to buy based on income only 65% actually have enough deposit to do so. This can be varied to reflect local circumstances.

4.29 Next, households who rent are divided between those who are likely to afford private rent, below market rent or social rent. The Tool examines rent affordability by looking at income level in relation to both the median and the 30^th percentile of market and social rents. Those with incomes nearer the 30^th percentile are more likely to need social rents and those nearer the median to afford private rents, with intermediate rent somewhere in between. The CHMA suggests the following approach and parameters as a starting point:

• If households are spending less than 25% of income on rent – can afford private rent,
• if households are spending between 25% and 35% of income on rent – may benefit from some form of subsidized market rent (called below market rent in the Tool,
• if households are spending more than 35% of income on rents (including Housing Benefit/ Housing Element of Universal Credit) – may benefit from social rent.

4.30 The key findings summary template should now be completed using these estimates and included at the start of the HNDA report.

Data Sources

(a) Existing Housing Need – Default in Tool

(ai) Homelessness

• A count of homeless households in temporary accommodation.
• Scottish Government Homelessness Statistics
• Built into the HNDA Tool and called HoTOC

(aii) Both Overcrowded Households and Concealed Families

• 2022 Census
• Built into the HNDA Tool and called HoTOC

(b) Existing Housing Need – Local Authority Own Estimates

• May include items such as live homeless cases, overcrowded households, concealed families, care and support needs, poor quality housing etc. Care must be taken to avoid double counting and this must be written up in the HNDA.
• Estimated by authorities based on national datasets such as the Scottish Household Survey, Scottish House Condition Survey, 2022 Census, Scottish Government Homelessness Statistics, Scottish Housing Statistics and locally gathered intelligence or evidence from administrative data collections e.g. waiting lists, local surveys/ research and local consultation.

Please note - this should exclude any existing housing need that can be met with an in-situ solution using the existing stock.

(c) Household Projections

• National Records for Scotland
• Built into the HNDA Tool

(d) Affordability to Tenure Future Housing Need (di) House Prices

• SG Datapack provided to local authorities by CHMA (based on Register of Scotland house price data)
• Built into the HNDA Tool

(dii) Gross Household Income

• Scottish Government Uprated Local Level Income Estimates
• (built into the HNDA Tool)
• CACI (purchased by some authorities)

(diii) Private Rent Prices

• SG Private Sector Rent Statistics
• (built into the HNDA Tool)
• Estate and letting agents
• Local rent data collections

Section 3 – Key Issues and Outputs

Key Issues

4.30 The key issues table below should be included at the end of the chapter.

LHS and LDP:

Future need for additional housing units broken down by household who are likely to be able to afford:

• owner occupation
• private rent
• below market rent
• social rent

Key Issues Identified in the HNDA:

1.

2.

3.

4.

Outputs

4.31 At the end of this section authorities should have:

• agreed all scenarios and assumptions feeding into the HNDA Tool with the HMP
• an estimate of existing households in need who require additional housing units (i.e. not existing households whose need can be delivered by an in-situ solution)
• projected estimates of additional owner-occupied housing required
• projected estimates of additional private rented housing required
• projected estimates of additional required
• projected estimates of additional social rented housing required
• clearly stated the key issues which will inform the LHS and LDP