HOUSING PROVISION IN RURAL AREAS

PAPER FOR WEST MIDLANDS BUSINESS COUNCIL

Foreword

Country people generate 25% of the nation’s wealth and 23% of its jobs. 20% of the West Midlands’ population lives in our market towns, villages and open countryside. Throughout the region (urban and rural) there is an under-provision of housing, with an estimated need for 6000-6500 affordable dwellings annually to 2011, with estimated delivery likely to be 2200. 

Homelessness is worst in Herefordshire and Shrewsbury. In-migration to the rural parts of the region continues to push up house prices beyond the reach of much of the rural workforce.   The inadequate provision of rural housing is making it difficult for rural people to afford to stay in the communities where they grew up and is frustrating the ability of the rural economy to serve the needs of the countryside and the country as a whole.

The pressures on rural housing are likely to increase unless urgent action is taken. The national debate on housing and current planning policies pays insufficient heed to the growing crisis in housing in rural areas, particularly in villages in the wider countryside. The problem of affordable housing cannot be addressed in isolation from the insufficient supply of rural housing as a whole. More housing for rural communities is needed, not just in the RRZs, larger villages or market towns. 

Our recommendations are practical proposals to government, local councils, planners, housing associations and landowners, to enable villages and smaller settlements once more to grow organically and incrementally, as they used to do. They form a response to the Regional Housing Strategy and a wider set of recommendations to key influencers.

RECOMMENDATION 1

The wording proposed in paragraphs 9 and 10 (i) of draft Planning Policy Statement 7 (PPS 7), together with the review of PPG 3 in 2004 in England and PPW 2 should clearly encourage local planning authorities to meet local housing need as close to the origin of that need as possible through the organic, incremental growth of villages; to allow relatively small scale, well designed, housing developments in rural settlements of all sizes and to achieve the objective of sustaining rural communities and the rural economy – applying flexibility to the village envelope where necessary to achieve this.

RECOMMENDATION 2

Both national and local policy should contain a presumption in favour of the re-use of redundant agricultural and commercial buildings in rural areas. On some sites mixed commercial and residential use could be a sensible option in the locality. This presumption should extend to residential use, where the location is close to a highway and other public services. Re-use of agricultural brownfield sites should not be automatically excluded.

RECOMMENDATION 3

The principles guiding planning authorities on housing in settlements of fewer than 3,000 people in greenbelts, national parks and AONBs should be essentially the same as in the rest of the countryside, namely to allow small scale, well designed housing development, subject to demonstrated local housing need, to support the rural communities and businesses that give these areas their economic heartbeat and conserve the landscape.

This approach should be underlined in PPS 7, the reviewed PPG 3 and in PPG 2 on Greenbelts when that is reviewed.

RECOMMENDATION 4

National policy should support and encourage the contribution that rural land owners can make to the provision of affordable housing, and protect their ability to ensure that land or houses provided for this need can be retained in the affordable housing sector, for local people.

RECOMMENDATION 5

Exception site policies, a valuable mechanism for providing desirable small scale housing developments in rural areas, should be retained. The prohibition in practice on subsidising affordable housing schemes on exceptions sites through small scale open market housing development should be removed.

RECOMMENDATION 6

It should be made explicit that agreement to an exception site should not require the developer to be a registered social landlord (RSL), because most exception sites are small, and the costs of compliance with the panoply of Housing Corporation regulation can put off small developers who wish to develop an affordable housing scheme without public finance.

RECOMMENDATION 7

Quota sites should not be seen as a support mechanism for solving the rural affordable housing problem, because they do not allow local planning authorities, and the communities they represent, the flexibility they need to develop small scale housing provision in smaller settlements.

RECOMMENDATION 8

The agricultural occupancy condition should be extended to a more general “rural-based enterprise” condition. However, it is equally important that local planning authorities show a greater readiness to accept that there are situations where the continuance of the tie is no longer appropriate.

RECOMMENDATION 9

Consideration should be given to granting discretion to those administering the Starter Home Initiative (SHI) to determine what constitutes a “keyworker” in a rural area.

RECOMMENDATION 10

The fiscal boundary between Schedule A and Schedule D should be removed and all activities carried on as a single economic enterprise that are taxed within Case 1 Schedule D should be treated as one business for all income tax purposes. (Taken from ‘Reform to Perform’, CLA 2002, which proposes a reformed tax regime for small businesses, including those including let housing in rural areas.)

RECOMMENDATION 11

Local authorities should use the revenue raised from additional Council Tax on second homes to support affordable housing in rural areas, where there is a need, since this is the purpose for which local authorities were granted the power to raise the additional tax.

1.         A recent Joseph Rowntree Foundation study (Private Renting in Rural Areas, by Mark Bevan and Lora Sanderling, Centre for Housing Policy, University of York) found that the contribution of rural land owners to the private rented housing sector is very significant.

The survey found that CLA (Country Land & Business Association) members provide 38% of all private rented housing in rural areas. Some of this rented housing is at open market rents, but much too is at controlled rents. More again is provided to employees and retired employees at low rent or even rent free. Thus the provision of rented housing in rural areas, particularly for those employed in land based businesses, is already dependent to a significant extent on subsidised rents. It can be easily forgotten that a consequence of a decline in the profitability of farming, as production support is reduced and UK produce is exposed to global competition (sometimes at lower cost and with a lighter burden of regulation and environmental standards), will be that it becomes progressively more difficult for owners of integrated estates to support the subsidy and opportunity costs contained in low rent estate housing and houses with agricultural ties. 

Why rural housing is such an important issue

2.         The national debate on housing, on the availability of homes and the level of house prices, has focused so far on the situation in our cities and major towns and on housing pressures in the south-east of England in particular. As a result, the debate has neglected the needs of the 13 million people who live and work in the countryside, regarding their needs as secondary to those of the majority of voters who influence decision making at national and regional level. The regional housing strategy is at risk of taking the same approach.

3.         This tendency to see the countryside from the perspective of the demands of the urban majority has two damaging effects. First, the countryside is seen as a secondary element in the national economy, whereas it should be recognised as an important place in its own right, generating 30% of the nation’s jobs and 25% of its GDP from 23% of the nation’s population (Defra: Rural Affairs Forum for England Conference, Reaseheath, November 2003).

4.         The second effect is that the countryside is seen primarily as a useful place to relieve pressure on the housing market in towns and cities. The intrinsic need of the countryside itself for a sufficient provision of suitable housing to meet local demand is forgotten in this top down view. Worse than that, it is frustrated where local authorities conclude that consents for major housing developments in larger settlements must be balanced by tighter restrictions on smaller scale housing developments in the smaller towns and villages. Such an approach will not supply the organic, incremental, small scale development of rural housing needed to enable rural communities and the rural economy to thrive in the future. Housing policies in the broad countryside of settlements of fewer than 3,000 people must, first and foremost, meet the needs of local people. 

5.         As the Chancellor, Gordon Brown, recognised in his statement to the House of Commons on the 2002 Spending review, it is essential both for the country as a whole and for the countryside in particular that the rural economy is successful. To be successful, there must be a sufficient provision of suitable housing in rural areas, just as any economy needs such a provision. 

6.         It will be futile to pass legislation to speed up the planning system, to introduce local development frameworks and new planning statements and guidance to encourage suitably scaled and designed economic development in the countryside, if at the same time action is not taken to ensure a sufficient provision of suitable rural housing. 

7.         Larger villages and market towns also suffer and solutions will need to be found to promote better provision there, as well as in the wider countryside. Indeed, successful larger villages and market towns are essential pieces in the jigsaw that is a successful rural economy. They generate jobs and provide markets for products from the countryside. The settlements under 3,000 people are the communities that particularly tend to be left behind by the national housing debate, not always susceptible to policies designed for larger or urban populations.  

Factors increasing the pressure on the provision of rural housing

8.         Easier communications, at least by private car, between urban centres and their rural hinterland, changing social patterns, smaller households and people’s increased mobility throughout their lives make it difficult to make objectively robust estimates of the aggregate demand for rural housing.

9.         A macro, or top down view of housing needs tends to neglect the value that exists in a rural community.  At the same time, as housing policy for urban areas is returning to the need to reconnect people with their local communities, the benefits that rural communities can provide, in terms of support networks, social enterprise and as a network for local business, should not be put at risk by ill considered policies.

10.       Thus, it is as valid and important to look at the pressures on the provision of rural housing through a qualitative assessment of the factors affecting this provision, as it would be to try to aggregate all the local rural housing need. It is difficult to identify the correlation between housing and employment need in rural areas. We note that this is recommended in the RHA and would agree it is worthwhile research.

Migration into the countryside

11.       In the 25 years to 1996, the population of rural England grew by 24% compared to a national increase of 6% (Joseph Rowntree Foundation). Recent Defra figures show an inflow of population into rural areas in England alone in the period 1991-2001 of about one million (Defra: Rural Affairs Forum for England Conference, Reaseheath, November 2003). Taken together, these figures indicate a net increase of two million in twenty years

12.       Inward migration has brought an influx of commuters to the countryside. Outside money can price local people, dependent on a local, land based and/or lower wage economy, out of the market and raise prices across the range of local housing.  

The loss of council housing from the affordable housing market

13.       Up to one third of council houses were lost to the affordable housing sector in the most rural districts in the 1980s (Prof Keith Hoggart, Political Ideology, Sectional Interests and Rural District Housing Policy, April 1996).  Sales under ‘the right to buy’ still outstrip new provision by Registered Social Landlords (RSLs), mostly housing associations, in many places.

14.       The loss of social housing in the countryside was slowed, although not reversed, by the legislation of the late 1980s (Local Government and Housing Act 1989) and the 1990s (Housing Acts 1996 and 1998) which permitted housing associations to keep a share of the equity of their shared ownership houses and which exempted housing associations in rural areas (outside settlements of 3,000 or more) from the obligation to offer the right to buy to their tenants.

Trends in the occupation of homes and tighter village envelopes

15.       While the number of individual households as a whole has risen, with more single occupancy households, house building and conversions have tended to focus on creating dwellings with three or more bedrooms. In addition, whenever adjoining cottages are bought and converted into a smaller number of larger homes, the supply of houses in relation to local demand falls. This is of particular concern to young, elderly and single people who find less choice of property to buy or let. Not only does this create difficulties for more people who would like to remain in the places where they grew up; it also undermines networks of family support and eventually puts a greater strain on social services. Infilling cannot always compensate for this reduction in smaller dwellings, and there are limits to the desirability of this practice, since in many villages it is the space between groups of houses and other buildings that give a settlement its character and make the village a successful community and a good place to live.

16.       In the view of the Town and Country Planning Association (TCPA), a one-size-fits-all policy on densities will not work. In particular, the TCPA rejects land-saving arguments for higher densities. Building homes at higher densities does not necessarily save much land, unless community infrastructure is compromised. In a separate reference to the urban situation but very relevant to rural policy, the TCPA concludes that “if all the emphasis is placed on achieving high densities without addressing people’s preferences, needs and aspirations, and design quality, then the urban renaissance will not be sustained, further stimulating flight from major towns and cities”.

17.       As the countryside has accepted larger housing developments, usually in larger settlements, so local authorities have been keen to deflect pressure for new housing away from smaller towns and villages, in particular away from greenfield sites. However, where occupation density per house is falling, such a policy further tightens the provision of housing in that village.

18.       It is notable that the overall net increase in the rural population has not been matched by an increase in population in all villages and small settlements and, as in the housing stock as a whole, the number of empty properties in rural areas (already a very small figure in relation to the overall stock) is falling. 

Second homes

19.              Local authorities have the power to charge a 90% Council Tax on the owners of second homes. The billing authority may be the county, rather than the district. If the district wishes to use the proceeds of a 90% Council Tax to support affordable housing, it must do so in agreement with the billing authority. Not all local authorities re-use funds so raised in this way. The Institute of Welsh Affairs report, (Affordable Housing in Wales, A Source of Contention, September 2003) states that all Welsh local authorities do, but it is not much of a deterrent to incoming buyers. While policies to seek to prevent people from buying property as second homes are likely to fail, policies to respond to the phenomenon are more likely to bring lasting local benefits.

Phasing out of Local Authority Social Housing Grant

20.       The decision by the Government in 2003 to phase out Local Authority Social Housing Grant (LASHG) will have the effect of reducing the overall provision of centrally funded public support for affordable housing schemes in rural areas, because its loss will more than cancel out the increase in the Rural Programme of the Approved Development Programme of the Housing Corporation planned over the next two years (increase from 1,600 starts in 2003/04 to 1,750 starts per year in 2004/05 and 2005/06).

21.       Local authorities retain the power to support affordable housing schemes from their own resources, to set quotas (within limits) for affordable housing on sites zoned for housing in local plans, and to negotiate Section 106 agreements that deliver affordable housing alongside consents for other planning applications. However, there is no increase in local authority resources to compensate for the loss of LASHG. There are many other demands on the resources of rural local authorities, which continue despite the fact that many shire authorities have recently been awarded grant settlements at below the average for the country as a whole. For example, South Shropshire district council had been planning to support 100 new affordable homes. Unless the loss of £45m LASHG is made up by the Housing Corporation, either directly or through transitional arrangements, it is likely that only 20 will now be funded. Quota sites are a more effective means of delivering affordable housing in larger rather than in smaller settlements, and Section 106 agreements in rural areas have so far been limited to the provision of solely affordable housing schemes on a relatively small scale.

22.       The requirement to achieve the Decent Homes standard raises the issue as to whether this should come from the Single Regional Housing Pot (SRHP). Metropolitan areas who have not transferred stock, much of it in poor condition, will arguably be unfairly advantaged against Registered Social Landlords, Housing Associations, who will have to remedy from their own budgets.

The effects of environmental and planning designations 

23.       Designations, such as National Parks, Areas of Outstanding Natural Beauty, World Heritage Sites, or simply conservation areas, are all intended to protect desirable natural or manmade features from unsuitable development. They can also have unintended, though foreseeable, additional effects on the housing market. They award a brand of “attractiveness” to an area, and entice people to want to live there, because they are “protected”, and they lead planning authorities to be more cautions than they otherwise would be in allowing housing development. 

A bottom up approach in planning to meet local housing need through the market where possible

24.       The problems of high prices and lack of flexibility in the provision of rural housing result, fundamentally, from suitable supply failing to keep pace with demand. In other economic sectors, supply would increase to match demand and the price would fall back to a new equilibrium. 

25.       Rural communities do not want disproportionately sized estates grafted onto the edges of villages. However, village appraisals often show that communities would be content to see smaller, well designed housing developments which enable the village to sustain its population, shop, pub and/or school. True sustainability in the countryside must rest on economic and social pillars as well as conservation of the environment. The planning system, so long as it follows a top down sequential approach to housing, will not reflect these local needs and therefore cannot promote rural sustainability. 

26.       Current Planning Policy Guidance on housing, PPG 3, states at paragraph 14 that: “A community’s need for a mix of housing types is a material consideration which should be taken into account in formulating development plan policies and in deciding planning applications involving housing.” This has not prevented local planning authorities from adopting overly restrictive policies.  

27.       A particular concern is the practice in certain areas of the planning policy framework identifying one village or rural settlement, from a number of potential locations, as being appropriate for development at the expense of the others. Such an approach leads to the balance of the chosen settlement being irretrievably altered and the continued viability of the others being called into question as both people and businesses find themselves obliged to move.

28.       A preferable approach would be to facilitate relatively small scale and well designed developments through planning guidance and local decision making that loosens village envelopes, allows conversion of redundant farm buildings into residential use, as well as for commercial purposes, and extends these same principles to the green belt and within national parks and AONBs. In those designated areas planning authorities should be discouraging major developments, not those meeting local need. 

29.       A more wholehearted commitment to allowing more small scale housing in rural settlements of all sizes would assist flexibility in the provision of rural housing, by giving more options for people to move up the housing ladder and by enabling employees to live closer to diversifying rural businesses. It could also be expected to have at least some beneficial effect on house prices, although bigger trends in housing demand and supply across regions will continue to be the major influence on prices. Nevertheless, the most acute rises in recent years in prices in rural areas have been at the lower end of the market, so an increased supply of housing - so long as it was mixed and not only “executive style houses” - might be expected to start to moderate this skewed price effect. In any case, the positive impact on flexibility would be worth attaining on its own merits, in view of its benefits to the rural economy and rural sustainability.

30.       The affordable housing sector should not be seen or tackled in isolation. Part of the increasing perceived need for greater provision of affordable housing has arisen as a result of excessively restricted flexibility and supply within the housing market as a whole. Thus, part of the solution to the provision of suitable rural housing must lie in reversing these excessive restrictions, and in encouraging the planning system to meet the local need for all types of housing, not just in the affordable sector.

31.       Whilst the existence of development controls continues to restrict the supply of housing in the countryside below that which would meet demand in an unrestricted world, the price of housing will remain higher than local economic conditions would otherwise determine, and the availability of housing at the lower end of the market will be reduced. 

32.       “Affordable housing” in smaller rural settlements is not curren