House of Commons - Rural Communities - Environment, Food and Rural Affairs Committee

Rural Communities - Environment, Food and Rural Affairs Committee Contents

5 Housing

Affordability

117. In the previous chapter we noted that lack of affordable housing can be a brake on economic growth. Between 2001 and 2011 house prices rose by 94%; during the same period wages rose by just 29%, making buying a home increasingly beyond people's means.[161] Ensuring the availability of affordable housing is an issue common to both rural and urban areas but the problem is exacerbated in rural areas, particularly the National Parks, which account for some of most unaffordable places to live in England.[162] On average people working in rural areas earn less than those working in urban areas and rural homes are more expensive than urban ones.[163]

Chart 1: Average house prices, Q1/2005 to Q1/2013

118. The cost of living is also rising faster in rural areas than in their urban counterparts. The 2012 Countryside Living Index found that inflation over the previous year stood at 7.7% compared to the national CPI average of 4.3%. During that period the average rural dweller spent £2,000 a year more on essential goods such as vehicle and domestic fuel, food and home maintenance—£5,992 compared to the UK average of £3,986.[164]

119. Workers in industries typical of rural areas such as tourism and agriculture are traditionally low paid. Gillian Elliott told us that "in areas like Eden and South Lakeland, we are talking about it costing people seven times the average to get deposits down on properties. In our rural area, tourism is vital as the main employment and it is a low wage sector".[165] Against this backdrop, migration from urban areas and an increasing shortage of homes are causing house prices to rise further—fewer homes are being built in England today than at any time since the 1920s—just over 100,000 a year compared to a projected requirement for 240,000.[166] The problem is not confined just to the private sector, there is also a shortage of social housing. In 2011-12 the amount of social housing created in England fell for the first time since 2006-07. There are currently 1.8 million households on waiting lists for social housing.[167] While the proportion of social housing has decreased in all areas, the sharpest decline has been in rural England.[168]

120. Failure to address these problems will have grave consequences for rural communities. If young people are priced out of rural areas then the available pool of labour for the local economy and service sector will diminish. Alongside this, demand for services such as schools, shops and pubs will also decrease making their existence less viable.[169] As Graham Biggs MBE, Chief Executive, Rural Services Network, told us, "unless you have some affordable housing breathing new life back into the village, there is only one alternative to that and that is the village will slowly die. Having lost it, you will not get it back".[170] It is imperative that we build more homes in our rural areas. Failure to do so will undermine the future sustainability of our rural communities.

121. Councillor House told us that one solution could lie in the hands of the Treasury: "prudential borrowing is encouraged by the Treasury for all other aspects of local infrastructure, but not for housing", and "local authorities having full use of prudential borrowing powers to invest in housing, rather than the cap imposed by the Treasury could, broadly speaking, wipe out the problem of housing supply over the course of a Parliament of two".[171] We urge the Government to consider whether local authorities should be allowed to invest in housing under normal borrowing guidelines. If the Government opposes this suggestion it must set out why.

Housing as a ministerial priority

122. Defra has recognised the social and economic importance of affordable housing for rural communities and made addressing them a ministerial priority. In the Rural Statement, Defra list a number of measures the Government is taking that, while not specifically targeted at rural areas, they consider will help address the problem of lack of supply of affordable housing. Measures include delivering affordable homes through the Affordable Homes Programme, simplifying the planning system under the National Planning Policy Framework, bringing empty properties into use, and introducing neighbourhood-led planning. In addition to these, in September 2012 the Government announced a series of additional measures aimed at stimulating house building in the UK—parts of which were later enacted through the Growth and Infrastructure Act. We discuss some of these measures and their potential impact on rural communities below.

Affordable Homes Programme

123. Under the Affordable Homes Programme, the Homes and Communities Agency (HCA) is allocating £1.8 billion to deliver up to 80,000 new homes for Affordable Rent and Affordable Ownership by 2015. From 2015 some £3.3 billion will be available for the construction of a further 165,000 houses. Successful bidders under the programme are required to re-let a proportion of their existing stock at an 'affordable rent', set at up to 80% of local market rent, and use the additional revenue from this higher rent to supplement the grant they have received from the HCA. The majority of new homes built under the programme will also be let at Affordable Rent.[172]

124. The Affordable Homes Programme model requires the Government to pay less grant per home than under previous schemes—£20,000 compared with £60,000 under the previous National Affordable Housing Programme—while housing providers borrow more and can charge higher rents. The National Audit Office noted that:

The new scheme represents a reduction of 60 per cent in average annual spending on affordable homes over the four years of the Programme from 2011-12 to 2014-15, when compared to the three years up to March 2011. The Programme will increase providers' financial exposure, with the sector facing challenges in securing bank financing for capital investment and over the cost of supporting both future and existing debt.[173]

According to the NAO, under the AHP providers have to spend some £12 billion on new homes of which the government funding is £1.8 billion. The NAO estimate providers will have to borrow around £6 billion, the remaining £4 billion comes from 'additional sources'. Additional sources may include converting existing properties from social rent to the higher affordable rent and property sales 'principally through shared ownership'. While this latter step will mean more people are able to get on the property ladder it will remove housing from the pool available for social rent.[174]

125. There are 1.8 million households on waiting lists for social housing and over 53,000 of these are currently living in temporary accommodation such as b&bs and hostels.[175] The picture below shows how rural areas such as the southwest are among those with the highest numbers of households in temporary accommodation.

Chart 2: Households in temporary accommodation (September 2010) per 1,000 households, by local authority area[176]

126. The Taylor Review in 2008 found that smaller rural communities (under 3,000 people) were where the "challenges of unaffordable homes, low wages and declining services are at their greatest".[177] There are over 16,000 such settlements in England with a combined population of close to six million people.[178] The Government have recognised the challenges faced by small villages and hamlets and, as Defra state in their evidence to us, these settlements account for almost 10% of the Affordable Homes Programme outside London (8,000 homes).[179] The largest provision of homes is going to Cornwall (548 homes) which has a high number of people living in temporary accommodation .[180] Sue Chalkley, Chief Executive, Hastoe Housing Association, told us she was concerned that the Affordable Homes Programme might not deliver the 10% of homes to rural areas that it had committed to:

a number of non-specialist rural housing associations said that they were going to develop rural but are now finding it a bit more complicated than they thought and they are substituting those schemes with urban schemes [...] there is no particular imperative to deliver the proportion of rural that was originally in the programme, we may not even achieve the 9% that was there originally.[181]

This concern is supported by the National Audit Office who, in their report into the AHP, noted that "some 51 per cent of schemes are indicative, because they have not been identified, are not sufficiently progressed, or do not yet have planning permission [...] schemes that are planned for late delivery are more likely to be provisional and are therefore inherently more uncertain."[182]

127. We welcome that under the Affordable Homes Programme for the period up to 2015 some 10% of approved bids are for homes in those rural settlements identified by the Taylor Review as most in need of affordable housing. However, we are concerned the scheme does not go far enough. The problem of lack of affordable housing in some rural areas is so acute that we do not believe that the Affordable Homes Programme up to 2015, which aims to develop 8,000 homes among 16,000 rural communities, will be sufficient in scope to make a meaningful impact, particularly in those areas with the highest numbers of households in temporary accommodation such as the southwest of England. The Government has allocated a further £3.3 billion to the Affordable Homes Programme from 2015 onwards—we expect a larger proportion of this money to be spent in rural areas than has happened in the current spending round.

128. Furthermore, we are concerned to learn that while 10% of approved bids under the Affordable Homes Programme are for affordable homes in smaller rural settlements there is no target or imperative to ensure that this proportion is actually delivered. We expect the Rural Communities Policy Unit to monitor the progress of the Affordable Homes Programme and work with the Homes and Communities Agency to ensure a minimum of 10% of homes built under this Programme are in those rural settlements identified in the Taylor Review as most in need. We expect to hold Defra to account should the proportion fall below the 10% threshold.

AFFORDABLE RENT MODEL

129. The introduction of the Affordable Rent model has the potential to raise funding to finance new homes but for rural areas it also raises many concerns.[183] Under the Affordable Rent model rents are tagged at up to 80% market rent, much higher than social rents which, set by government formula, are typically around 40% market rent (although higher in some areas).[184] Graham Biggs considered that for "rural workers working in the rural economy that 80% will take [houses] outside of affordability in a lot of cases" or, as Sue Chalkley pointed out, move "them on to partial housing benefit".[185] Indeed, the impact assessment on affordable rent states that over 30 years housing benefit expenditure may increase by between £454 million and £603m as a result of the scheme.[186] The increasing unaffordability of privately rented accommodation is already reflected in an increase of half a million people claiming housing benefit over the last three years. In rural areas where market rents are low there is also the risk that the difference in rent between the social and private rented sector is too narrow to generate sufficient funding to compensate for the reduced government grant.

130. The Affordable Rent policy which increases rents on the least well off in society in order to compensate for a marked reduction in funding from central government is one which gives us concern, particularly for rural areas where the cost of living is already high. Affordable rents, tagged at up to 80% of market rent, means homes will remain unaffordable to many rural workers. The RCPU has a crucial role in monitoring the outcome of the affordable rent model in rural areas and must seek amendment to the policy if it is found to be failing to assist those in rural housing need.

Right to Buy

131. In November 2011 the Government published for consultation Laying the foundations: A housing strategy for England which outlined a number of measures to be introduced by the Government to stimulate the housing market. One of the measures, which came into force in April 2012, was an increase in the ability for social tenants to buy their own homes. The reinvigorated Right to Buy scheme offers eligible tenants discounts of £75,000 off the value of their home. Under the scheme up to two million social tenants may be able to buy their own home and there is clearly enthusiasm among them to take advantage of the scheme—the number of homes sold between April 2012 and March 2013 under Right to Buy totalled 5,942, more than double the number sold in the previous year and the highest number of sales since 2007.[187] The Government is anticipating 100,000 homes will be sold by 2019.

132. Under the scheme homes sold under Right to Buy should be replaced on a one-for-one basis but there is scepticism that this is achievable. The Chartered Institute for Housing raised concerns during the consultation period that under the fixed discount policy the government's claim that it can provide one new affordable rent home for each council house sold "will be difficult to maintain".[188] The LGA supported this view arguing that the centralised cap of £75,000 failed to take into account local housing demand and the cost of building new homes: "the level of discount may not leave enough funds to build a replacement home, some areas in need of more affordable homes may actually be left with fewer".[189] In addition, one-for-one does not mean like-for-like—a three bedroom house need only be replaced by a one-bedroom flat for the conditions of the scheme to be satisfied and new houses may also be subject to the affordable rent model.

133. In its response to the 2011 consultation the English National Parks Authorities Association (now known as National Parks England) raised concerns that an increased take up in Right to Buy would significantly hinder the ability of National Park Authorities to meet the affordable housing needs of local communities:

Even if the Right to Buy did not remove local occupancy restrictions, it risks removing an important element of housing stock that cannot be replaced without further new housing development is necessarily restricted in areas of high landscape value such as National Parks.

The Lake District National Park have confirmed that in total 1,000 existing affordable homes within the National Park which could be lost from the affordable housing stock if the proposed Right to Buy reforms take place.[190]

In its response to the consultation the Government replied that it "is not minded to add National Parks to the list of exemptions of Right to Buy, which would require changes to primary legislation. However, we welcome additional evidence of any impacts that the changes to Right to Buy have on affordable housing levels in National Parks".[191]

134. We support giving more people the opportunity to own their own home. The Government's Right to Buy scheme has the potential to make owning a home a reality for thousands of people. However, like our colleagues on the Communities and Local Government Committee, we are concerned that it may come at a cost to the amount of affordable housing available in some rural areas where supply is already limited. The Government's scheme is for houses to be replaced on a one-for-one basis at a national level. This means rural areas such as National Parks, where land for new housing is in short supply or expensive, may find that they benefit little from the Government's promise of one-for-one replacement. We have already commented on the problem of affordable housing in National Parks, though the impact of Right to Buy is by no means limited to them, further reductions in affordable housing stock are not acceptable. The RCPU must monitor the impact of Right to Buy on rural areas, particularly National Parks, and if necessary put the case for them to be exempt from this scheme.

Welfare Reform Act 2012: under-occupancy

135. From 1 April 2013, working-age social tenants in receipt of housing benefit experienced a reduction in their benefit entitlement if they lived in housing that is deemed to be too large for their needs. Enacted under the Welfare Reform Act 2012, this policy has become better known as the 'bedroom tax' or 'spare room subsidy'. Under this policy affected tenants faced a reduction in their eligible rent for housing benefit purposes of 14% for one spare bedroom and 25% where there were two or more spare bedrooms. Under the terms of the policy children under ten were expected to share a bedroom regardless of gender and children of 15 or under of the same gender expected to share a bedroom.

136. Social housing tenants have traditionally enjoyed security of tenure over a long period regardless of any changes in their accommodation needs. In a bid to redistribute housing stock more fairly the Government's Welfare Reform Act 2012 challenges tenants who 'under-occupy' to pay more or move. This is a problem for rural areas which tend to have a small social housing stock, comprised of more larger homes. As rural areas typically have few available social homes nearby, tenants could be asked to move greater distances away from friends, family and schools.[192] As Councillor House, told us

Typically, a physically large rural district with a small population and a small stock has not got the flexibility to deliver. For example, there is an issue where a resident is in a threebedroom property yet may fill a vital role in the local economy. Their loss of housing benefit, because of underoccupancy, is going to force them to move. Where they can be moved to, in reality, is an unanswered question for many of these people. I am sure you have all got casework of examples yourselves in your communities, be they rural or urban, but they are by definition more acute in rural areas, where that flexibility is much lower.[193]

Sue Chalkley also pointed out that the under-occupancy policy may prevent councils from looking to the future,

We have a policy of, where we have a young family, allowing them a spare bedroom so that they can grow into their home, because there will be nowhere else for them to live—those eight, perhaps, homes in that village are the only affordable homes. We will not, potentially, be able to do that in future.[194]

Under the policy a family with two children, a girl and a boy both aged 8, will be housed in a two-bedroom house. Once one of the children reaches 10, the family would be moved to a three-bedroom house. The lack of available housing in rural areas could mean the family leaving the area and the children moving schools. RICS argue that under-occupation penalties should not apply where affected tenants are unlikely to secure another home in the 'travel to work' area. We would add 'travel to school' area to their argument. RICS note that the Right to Acquire (the ability for housing association tenants to acquire their homes) does not apply to settlements of less than 3,000 people and argue this same exclusion should apply to the rules on under-occupation.[195]

137. We agree with the Rural Services Network that the impact of the under-occupancy policy on rural areas needs careful monitoring. Rural areas may be disproportionately affected because the nature of the housing stock means spare rooms might be more common. The under-occupancy policy also risks disadvantaging rural communities further because they lack the range and quantity of social housing required to provide the flexible response the policy demands. It is difficult to see how the under-occupancy policy, which might cause key workers to leave areas where they perform a vital role, and force children to move schools, is of benefit to rural communities. Settlements of fewer than 3,000 people, the same threshold as the Right to Acquire scheme, should be excluded from the under-occupancy policy.

Planning and development

138. There is a shortage of housing across England. Estimated demand is for 240,000 new homes every year. We are currently building less than half of that. The problem of lack of available housing in rural areas has been repeated in successive reports from the work of Elinor Goodman's Affordable Rural Housing Commission in 2006, Matthew Taylor's 2008 Living, Working Countryside and in the work of the Commission for Rural Communities, yet the situation remains acute.[196] The Government has taken a number of steps to address the problem of lack of supply through simplifying planning rules first under the National Planning and Policy Framework and later under the Growth and Infrastructure Act.

139. In our Farming in the Uplands Report we recommended that Defra work with the Department for Communities and Local Government to ensure the new planning framework has a flexible and less restrictive approach to planning in rural areas.[197] The National Planning Policy Framework (NPPF) was published in March 2012. The Government states that the NPPF "has simplified the overly complex planning processes and introduced a new, more flexible and positive approach to planning, making it more transparent for local rural communities to be involved in advancing developments that best suit their needs".[198] The CPRE considered the initial draft of the NPPF to be fundamentally flawed, particularly the rural affordable housing element but "while the final policy is not perfect, improvements have been made, and the CPRE has no reason not to believe that the RCPU's influence contributed to this".[199]

RURAL EXCEPTION SITES

140. One way the NPPF supports rural housing is through the inclusion of a rural exceptions policy which allows for an element of market housing to be included on rural exception sites where this facilitates the development of affordable rural housing (known as cross-subsidy). An exception site is one that would not usually secure planning permission for housing, such as agricultural land next to but not within a local settlement area. Under the rural exception sites scheme a landowner will provide land at below market rate (commonly at enhanced agricultural value) on the basis that that land is being made available to build affordable homes for local people. We welcome the work undertaken by the RCPU to ensure that a sensitive approach to cross-subsidy on rural exception sites was included in the final NPPF.[200]

141. Sue Chalkley considered rural exception sites the "real key to unlocking and responding to rural communities because they feel safe with the exception site policy":

It has been a very successful policy from the point of view of responding to individual rural communities and the families ... we have had two or three open market sales on a scheme where there has not been grant, so that we can cross-subsidise and make the scheme work. It has to be managed very sensitively, because if it goes a little bit too far then you do get the hope value and you do get landowners looking to raise more.[201]

142. Proposals brought forward under the Growth and Infrastructure Bill would have permitted developers to renegotiate rural exception site agreements to allow a greater proportion of market housing than desired by the local community. By allowing a reduction in the number of affordable homes built on a site, this measure would have been severely detrimental to rural communities, particularly those with a limited supply of land and high house prices, such as National Parks. While we welcome the Government's amendment to the Bill to exclude rural exception sites from this measure, the need for the amendment does suggest to us a failure of rural proofing of the original Bill. The Growth and Infrastructure Act also integrates town and village green registration mechanisms with the planning system. We welcome the measures aimed at preventing vexatious applications for a town and village green. Such applications can be demoralising for a community trying to provide affordable housing, are costly to process, and can disincentivise landowners from making land available for rural exception sites.

143. Rural exception sites are not going to provide all the affordable housing that rural areas require. John Slaughter, Director of External Affairs, Home Builders Federation, told us that the policy was never "going to deliver enough to meet the scale of need" but he questioned whether "it has delivered as much as it should do".[202] The Minister concurred, "I do not think we should kid ourselves that exception site housing is going to resolve the shortage of affordable housing. That will come through a renaissance of housebuilding, which is a cross-Government agenda".

144. Rural exception sites are a key means of providing affordable homes in rural areas. They can unlock land for development, particularly for affordable housing for local people, and are popular within communities. It is therefore welcome that the Government exempted rural exception sites from the provisions of the Growth and Infrastructure Bill that would have jeopardised their future. That they were ever threatened does suggest to us a failure of the Bill to be effectively rural proofed.

145. The importance of rural exception sites to rural areas should be reflected in national housing policy. They are not going to solve the problem of lack of housing in rural areas on their own, but we wish to see the RCPU work with Department for Communities and Local Government and local councils to explore whether more homes might be made available under such schemes.

NEIGHBOURHOOD PLANNING

146. The Localism Act 2011 introduced new powers that allow communities to shape new development in their local areas by preparing Neighbourhood Plans or Neighbourhood Development Orders. Under the powers, which came into effect in April 2012, communities are able to have a say where they want new homes, shops and offices to be built; have their say on what those new buildings should look like; decide which green spaces should be protected; or grant planning permission for the new buildings they want to see through a new Neighbourhood Development Order.[203] While neighbourhood plans allow local people to get the type of development that is right for their community, the plans must still have regard to national policies and take into account the local council's assessment of housing and other development needs in the area. To prevent them becoming a 'Nimby's charter' they will only be able to specify a greater or equal number of homes to those proposed in the local development plan for the area. The Government hopes that by getting communities involved in the early stage of the planning process and by giving them the opportunity to shape new development, that development is more likely to be approved.

147. Putting together a neighbourhood plan is not cheap. The DCLG estimates that the average cost of drawing up a neighbourhood plan is between £17,000 and £63,000. To support this process the Government is making available grants of up to £7,000 to communities to help them draw up their plans. Neighbourhood planning will usually be led by the local parish or town council.[204] The local planning authority must also provide support—for example, it will organise the independent examination of the neighbourhood development plan to check the plan meets certain minimum conditions. In the vast majority of cases, it will also be the local planning authority which will pay for and run the neighbourhood planning referendum.

148. Neighbourhood planning has the potential to deliver development that communities want. As Graham Biggs told us:

Many of you in your constituencies will have had the experience of pretty much everybody in a village supporting the concept of affordable housing and then being opposed to it when a site is identified. I think neighbourhood planning has the opportunity of having that negotiation with the community much, much earlier in the process and an understanding that will lead to better outcomes. Certainly we have done surveys of our members and there is a lot of hope out there for the new system.[205]

It will be a big step forward if neighbourhood planning enables communities to have a say over the appearance and quality of development in their area. The Minister for Rural Affairs gave us an example of how, in the past, communities could put together a design plan "saying, 'If we are going to have more houses, we want them to look like this. We want them to be in keeping with the character of the village and have these kinds of features.' After a few challenges from a few developers, their status as supplementary planning guidance was removed."[206] A system that encourages a more constructive dialogue at local level and gives communities a say over the type, design and build quality of new housing, as opposed to one that forces on them the 'ugly estates' described by the housing minister,[207] will increase the likelihood of communities approving development. This is an objective worth pursuing.

149. It is too soon to say whether neighbourhood planning is going to be successful in delivering more and better housing—only three plans have so far been approved by their communities—but what is clear is that ongoing support to communities is crucial if the mood of optimism amongst communities identified by the Rural Services Network is to be capitalised on. Many communities lack the capacity, expertise and finance to deliver neighbourhood plans and the range of other community-led initiatives the Government is promoting such as the Community Rights to Bid, to Build and to Challenge. It would be unfortunate if the Government's devolution of responsibility to local communities led to the unintended consequence of increasing inequality within the countryside as those areas with the capacity and expertise transform their villages while others who lack the ability to act get left behind.

150. Defra told us that a rural support network already exists: "the Rural Community Action Network, the network of 38 rural community councils, and ACRE, which is its managing body, has a great deal of expertise on neighbourhood planning". In their evidence to us ACRE were less positive and considered that support for delivery of neighbourhood planning appeared to be too locked into concerns about process and regulations and the relationship with the NPPF.

The potential positive outcomes for the health and economic well-being that communities could achieve through debating the best way of securing a sustainable future are being sidelined in favour of testing and refining the process of getting neighbourhood plans adopted. We believe there is a role of Defra in ensuring that the DCLG's agenda on neighbourhood planning is monitored in terms of quality of outcomes that contribute to RCPU's wider agenda, not just in the number of plans produced.[208]

151. Neighbourhood planning may not always be the most appropriate tool for communities to use. ACRE suggests the wider local planning context should be the main factor in deciding whether a community should embark on a neighbourhood plan. They consider that tapping into consultation and development of the local plan might be a more effective approach for some communities, particularly where the community and the local planning authority are in agreement.[209] Such an approach would avoid the cost of a neighbourhood plan and is less onerous. A neighbourhood plan may also be ineffective in limiting housing in areas where there is a history of under supply. In addition, ACRE contend that

although DCLG acknowledges that the new Localism measures are simply additional tools in a large toolbox, it is investing heavily to provide financial incentives for both local authorities and communities to make Neighbourhood Planning the preferred option. We think this will lead to many negative experiences of the process which could have been avoided if impartial advice had been on offer to help communities make the right choice.[210]

152. One such negative experience might be caused by a vote against the neighbourhood plan at a referendum. Where the local plan is allocating significant housing to an area, it may be unlikely for a community to vote in favour of it through a neighbourhood plan no matter how much consultation has been done. The negative vote could have a demoralising effect on the community and quarantine it from active participation in the future.[211] Conversely, despite the Government's attempts to prevent Nimbyism, a community may agree a neighbourhood plan that rejects the proposed provision of affordable housing in their area. Planning magazine's 'What issues might arise in 2013?', identified an increase in tension between neighbourhood plans and local plans as one of the potential issues for the future:

Raising local residents expectations as to the power that neighbourhood planning would give them to control development in their area was always likely to result in conflict. Residents believe that neighbourhood plans should give them control over what gets built in their local area. Local planning authorities have a different agenda: promoting growth, delivering on housing targets and balancing the views of residents against law and policy. This tension is likely to the courts getting involved.[212]

153. Neighbourhood planning has the potential to transform rural communities. It offers communities the chance to have a greater say in what development they want, what it should look like and where it should be built. Furthermore, communities are more likely to accept new housing if they consider it adds value to their area rather than detract from it. Ongoing support for communities developing neighbourhood plans, particularly those that lack the capacity, expertise and finance to undertake this work, is crucial if the process is going to deliver the benefits communities have been led to expect. Through its rural networks Defra has a role to ensure that this vital support is available. Defra must also set out how it intends to monitor the neighbourhood planning process to ensure it does not have the unintended consequence of increasing inequality both within and between rural communities.

154. Despite its benefits, neighbourhood planning will not always be the most effective option for communities to choose to achieve the desired result. Where the community and the local planning authority are in agreement, there are better approaches which avoid the cost of neighbourhood planning and are less onerous. Defra must ensure that communities receive unbiased advice and only choose the neighbourhood planning option where it is in their interest to do so.

Second homes

155. Second homes add to the shortage of available housing and have helped push prices up in many rural areas, putting homes out of reach for local people. They can present challenges to local authorities in terms of needing to provide the infrastructure to support those homes despite their owners often making little contribution to either the local economy or community and therefore not sustaining that infrastructure.[213] Graham Biggs told us that while many second home owners "may eventually come to live there on a permanent basis and add an awful lot to the local community", second homeownership "does add demonstrably to the housing crisis" in rural areas. [214]

156. At the time of the 2011 census over 165,000 people declared they had second homes in another local authority that they used for tourism. The impact of second homes differs across the country. There is high demand for second homes in most National Parks where securing homes for local people employed in lower paid jobs is a problem, one that is particularly acute in the Lake District and Yorkshire Dales. However, in some rural areas that depend on tourism the buying power of people with second homes is vital to support local businesses.[215] In general, there are relatively few second homes in England but it is where they are concentrated that they can cause a problem for the local community. Sue Chalkley suggested a link between second home ownership by district council and the volume of town and village green applications,

I find it ironic that often when we are developing schemes and we are responding to the parish council that has come to us and asked for help, it is very often the people who have second homes in the village who then start objecting ... I would suggest in a number of cases they are vexatious and they run in parallel. I do wonder whether their first priority is the value of their home or the ongoing viability of the community.[216]

157. In their policy paper on affordable housing ENPAA point to the distinction between holiday lets and second homes:

There is an important distinction to be drawn between holiday homes and second homes. The former, if utilised well provide for local employment and increasing numbers of people enjoying the National Park. While the same can be true of second homes, more often they are left empty for long periods of the year..

This makes little contribution to local economies, adds to a shortage of available housing (particularly of smaller units on the market) and raises house prices. The experiences of second home ownership differ across the country with some seeing newcomers as innovators and bringing funds to rural communities, while elsewhere they contribute to ghost villages and bring little funds in. The level of occupancy; the spending behaviour and commitment of those who have second homes all seem important factors in a complex area.[217]

Cornwall has the largest number of second homes for tourism purposes (10,169), followed by Gwynedd (7,784), North Norfolk (4,842) and South Lakeland (4,684). Until last year second homes were afforded a 10% discount on council tax. The Local Government Bill 2012-13 put forward measures to allow councils to charge the full amount of council tax on second homes. The Bill received Royal Assent on 31 October 2012 and many councils are now scrapping the discount.[218]

158. Both Matthew Taylor's report and Elinor Goodman's before that suggested using planning use categories to address the problem of second homes in rural communities. Graham Biggs and Neil Sinden agreed that this option is worth exploring though, as Mr Sinden pointed out, using Use Class Orders "is not without its problems and it does need to be very carefully explored, but certainly it is something that is worth looking at".[219] Mr Slaughter cautioned against making the use class system any more complex and considered there to be potentially other ways of dealing with the issue:

There are tools available through the NPPF and neighbourhood planning. There are other initiatives out there. There is the Community Right to Build; there is the growing interest in custom build. All these are models that could help meet the needs of areas such as your own.[220]

One further tool might be granting local authorities powers to introduce a tax on second homes as ENPAA have suggested.[221]

159. High concentrations of second homes can have a negative impact on rural communities. They add to the shortage of housing, push up prices and their owners often add little to the local economy and community. People should not be prevented from buying second homes but we believe there is merit in the RCPU exploring options that may make the process either less attractive for the second home owner or more beneficial for the rural community or both. To reflect local circumstances implementing such options must be at the discretion of the local authority.

New Homes Bonus

160. The New Homes Bonus is a grant paid by central government to local councils for increasing the number of homes and their use. It is paid each year for six years and is based on the amount of extra Council Tax revenue raised for new-build homes, conversions and long-term empty homes brought back into use. The aim of the bonus is to incentivise local authorities to increase housing supply. We received evidence that the New Homes Bonus particularly disadvantages rural areas.

161. The New Homes Bonus is funded in large part by a deduction in Formula Grant. In their New Homes Bonus report, the National Audit Office described how local authorities that earn only low levels of Bonus will not make up their share of the sum deducted from the Formula Grant.[222] Cumbria Council told us that because rural areas "have much less scope for housing development they are likely to receive back only a fraction of what they contribute. The cumulative effect is likely to further redirect significant funding away from rural areas."[223] Urban areas already receive 50% more in local government funding than rural areas. We have made it clear that we wish the Government to reduce this gap but the New Homes Bonus has the potential to widen it further. The RCPU should monitor the impact of the New Homes Bonus on rural areas and seek urgent amendment if it is found to be putting rural areas at a disadvantage.

Help to Buy

162. It is becoming increasingly difficult for first-time buyers to enter the property market. A study by Shelter found that it now takes couples with children more than a decade to save enough money for a deposit on a home; for a single-person household it is even longer.[224] Increased demand for housing coupled with a lack of construction has fuelled an increase in house prices over the last 20 years to the point where home ownership is out of reach for many people. The constraint on mortgage availability as a result of the banking crisis has exacerbated this situation. According to the Homebuilders Federation "Mortgage availability [...] is the biggest current constraint on supply. If people can't buy builders can't build."[225] One might expect house prices to fall if people cannot buy but the general trend has shown this not to be the case. It is interesting to note that despite a record low in the number of new homes being constructed and people not being able to buy, profits of the major housebuilders increased markedly in 2011-12.

163. We have already discussed what the Government is doing to try and increase supply. The Government is also intervening in the market on the demand side. Through its Help to Buy scheme the Government is aiming to help people wishing to purchase houses but cannot do so without extra support. Assuming uptake from lenders, the Help to Buy scheme will offer some help to those wishing to purchase a home. However, it may also cause house prices to rise further. Unaffordability of housing is an acute problem in rural areas and we question the merit of a scheme that has the potential to make the situation worse. The Government's focus must be on measures to increase supply.

Changing demographics

164. Selective migration is transforming our rural areas. While some sparsely populated rural areas still suffer from outward migration, particularly of young people, the general trend is one of migration from urban to rural areas. This is increasing competition for an already limited supply of housing. Typically the migration is characterised by young people (16-29) moving away from rural areas alongside older people moving in—over the next 20 years the median age in rural England is set to rise towards 50. This is demonstrated in figures provided by the National Housing Federation for rural Yorkshire and Humberside as part of its Yes to Homes campaign:

the number of 30-44 year olds in rural Yorkshire and Humberside communities has dropped 10.3% in the last decade—more than double the 4% drop in urban areas;
the number of people in their 20s has risen, but only around two thirds as fast as in urban areas;
there are 2.5% fewer children under 10 in rural Yorkshire and Humberside, even though there are more children under 10 in England overall;
the number of over 65s in rural Yorkshire and Humberside areas has risen more than three times faster than urban areas in the last ten years; and
the number of over 85s has risen one third faster in rural areas over the past decade.[226]

This pattern of demographic change is repeated across rural England and has the potential to alter the character of rural communities. An ageing community will ultimately see its school close and other services such as shops and pubs may follow. An ageing population also requires increased social care as well as other services to support the vulnerable. Where key workers cannot afford to live in the area the local council will find it difficult to provide these services.

165. Providing the right kind of housing is key to retaining and attracting young people to live in rural areas.[227] Research commissioned by the Royal Institute of Chartered Surveyors examining the role different types of housing have on the difference in house prices between rural and urban areas concluded that "increasing the supply of smaller, starter homes in villages (as well as 'entry level' affordable homes in villages)" should make rural housing more affordable.[228] But it is not just a lack of affordable homes for young people that can be a problem within rural communities. An ageing rural population brings with it its own particular housing needs. Sonia Mangan, told us that,

[if older people] want to go on living in their community that they have lived in maybe for the last 15, 20 years or even all of their lives, then certainly it is a challenge if they want to downsize ... in terms of needs based accommodation for adults, if you are going to move away from residential care then you need some kind of supported accommodation ... there needs to be more, but it needs to be in the right places.[229]

Councillor Begy concurred,

I think the big issue we are going to face is that we have not been building onebedroom houses or onebedroom flats. If you talk to a registered social landlord, they say it is almost the same cost for doing a twobedroom rather than a onebedroom. I think one of the big issues that we councils are going to face over the next two or three years is people are going to say, "I want to come down from three bedrooms to two bedrooms," and whether we have enough of those; and certainly we will not have enough onebedroom. [230]

166. Selective migration is also transforming the social composition of some rural areas fundamentally. Professor Mark Shucksmith told us how this is "leading to a socially exclusive countryside where those of middle or lower incomes are unable to afford to live".[231] He considered there to be a growing inequality between people and places in rural areas. Some rural areas, particularly those most accessible from cities, have seen incomes rise, but against this background, as the CRC's State of the Countryside reports demonstrate, around 20% of English rural households are in or at the margins of poverty.[232]

167. We desperately need more housing in rural England and it is crucial that any policy that aims to address this problem takes account of local need. Many rural areas lack smaller properties that can serve both as an entry-level option for young people wishing to enter the housing market and as a retirement option for older people wishing to downsize. The shortage of smaller homes in rural areas must be addressed if attempts at increasing the supply of housing are to be successful in sustaining our rural communities. Failure to provide more of the right housing, at the right price and in the right place will exacerbate the existing problems of unaffordability and inequality that persist in some parts of rural England.

161 National Housing Federation press release, House prices rise three times as much as incomes over ten years, 16 August 2012; National Housing Federation research found that in 2001 the average price of a home was £121,769, and the average salary was £16,557. In the space of ten years the price of a home has risen to £236,518-an increase of 94%-whereas wages have risen just 29% to £21,330, making buying a home increasingly unaffordable for millions of workers. Back

162 According to National Parks England, the average house price in Exmoor is now 14 times greater than the average income, on the North York Moors it is 13 times greater. In Yorkshire and Humberside the average rural house price is now 10.3 times the average salary compared to 7.9 in urban areas. Back

163 Defra's statistical digest of rural England states that housing affordability is lower in predominantly rural areas than predominantly urban areas. In 2011, the average lower quartile house price was 7.8 times the average lower quartile earnings in predominantly rural areas. This compares with 7.1 in predominantly urban areas and 7.3 in England as a whole. In 2008, the Matthew Taylor review of the rural economy and affordable housing, Living Working Countryside, found that while people working in rural areas tend to earn significantly less than those working in urban areas, rural homes are more expensive than urban homes. Back

164 Farmers Guardian, Cost of living in countryside rises twice as fast as cities, 3 July 2012 Back

165 Q 2 Back

166 HC Deb, 5 September 2012, col 310; The problem is not a new one. In her Review of Housing in 2004, Kate Barker called for an extra 100,000 homes a year. At that time housing completions were around 160,000 a year. In the years following the Review housing completions fell by 50,000. Even before the banking crisis supply was not keeping up with demand. In the 12 months to March 2013 the number of housing starts fell by 3% according to DCLG figures. Back

167 See https://www.gov.uk/government/policies/improving-the-rented-housing-sector--2 Back

168 In 1980, 25% of the housing stock in rural areas was social housing compared to 36% in urban areas. By 2007, these figures had declined to 13% and 21% respectively, Source: Living, Working Countryside: The Taylor Review of Rural Economy and Affordable Housing, 2008 Back

169 National Housing Federation, Affordable Rural Housing: A practical guide for parish councils, October 2010 Back

170 Q 59 Back

171 Q 35 and Q 76 Back

172 Chartered Institute for Housing, Affordable Homes Programme-England, 27 September 2012 available at http://www.cih.org Back