Last week Damian wrote to Matthew Pennycook, Minister of State for housing, to follow up on a number of points that were raised during the Westminster Hall debate on the Cumulative impacts of housing development (which took place just before Christmas).
In this letter, Damian raised concerns about the affordability adjustment within the government’s 'Standard Method formula' for calculating housing need. While increased housing supply should, in theory, reduce prices, the current affordability formula creates a perverse incentive. Because the adjustment is based on median house prices, building new homes priced above the local median can increase an area’s apparent unaffordability. This, in turn, leads to higher future housing targets when the formula is reapplied.
Evidence from East Hampshire suggests this effect is occurring, with new homes generally priced above the existing median. As a result, the median house price rises and the affordability ratio worsens, even as overall housing supply increases. If average earnings remain unchanged, this means that significant numbers of new homes can be built while the area is simultaneously judged to have become less affordable.
Damian further argues that this effect aligns with market incentives for developers, who are encouraged to build higher-priced homes that are more profitable and simultaneously inflate future housing targets. Unless these distortions are addressed, the policy risks incentivising housing development that fails to improve affordability.
Damian is clear that East Hampshire needs a balanced approach to house building that delivers homes people genuinely need and want to buy.
A response to the letter has not yet been received.
The above clip is taken from oral questions to the Ministry of Housing, Communities and Local Government (12 January 2026).