How to develop affordable rural housing

Rural Housing Week 2023 focused on collaboration between landowners and partners to deliver rural affordable housing. During the week, the CLA provided online resources, including informative blogs and guidance, as well as hosting a webinar on rural housing.

We speak to Jo Lavis, Director of Rural Housing Solutions, about the key takeaways from the webinar and how members can help to ensure that rural affordable housing is built in their communities.

When discussing who should be first approached regarding developing rural affordable housing, Jo says early engagement is always recommended; however, rather than going straight to the planners, it may be helpful to speak to the local authority’s strategic housing or enabling officer first. She also suggests that landowners can informally build support for a scheme by explaining their proposals to influential members of the community, such as a local or parish councillor.

Jo notes that, in some cases, landowners have benefited from engaging with a Rural Housing Enabler (RHE). Working independently from a local authority, their job is to explain to landowners and communities the process for developing rural affordable housing, help to assess local housing needs, provide advice on site suitability, and build and maintain community support.

In June, recognising RHEs’ value, the government announced £2.5m to strengthen and extend the RHE network across England, which the CLA welcomes. The Action with Communities in Rural England website has a list of contact details for RHEs.

CLA members have sought advice on land value, with some concerned that delivering affordable housing will mean that they are not maximising the perceived value of their land, often called ‘hope value’. Jo says that the value of land reflects its existing use and potential future use if it is allocated for development in the local plan. She highlights that when a site is allocated for housing, local plan policies will also specify the type, size and tenure mix of housing to be provided on these sites. These requirements feed into the price paid for the land. Development proposals that do not make these provisions are very unlikely to gain planning permission, and the value of the land will remain that of its existing use.

Jo explains that the policy requirements for rural exception sites are even more stringent. Rural exception sites are not allocated in the local plan and are only considered for planning permission if they provide affordable housing to meet a local need in perpetuity. As such, there is no further development value to be had. Indeed, because the costs of building affordable homes exceed the income from rents and affordable sales, there would be a negative residual land value. As there should be an uplift in value from existing use for the landowner for bringing the land forward, grants will be made available to subsidise the viability of the scheme. Usually, the sale price is informally benchmarked to provide the landowner with around £10,000- £12,000 a plot or the equivalent of £100,000-£120,000 an acre.

Several local plans will allow a minority of the homes on rural exception sites to be for market sale. The number permitted is only sufficient to make the scheme financially viable, not to increase the site value, which should remain within the usual benchmark range.

Jo also notes that, occasionally, landowners have been offered a plot or property to retain instead of receiving a cash payment for the land. This option could be hugely valuable to members who would otherwise be unable to build a new home for their rental portfolio or an employee of their business.

Jo noted that, despite these options, the supply of new rural affordable homes is falling. Jo cites the National Planning Policy Framework, which states that most local planning authorities should not require affordable housing to be built on sites of less than 10 dwellings, except in designated rural areas. Research by Jo for the Rural Services Network shows that this policy has resulted in significant opportunities to improve supply being lost, meaning the policy should be reversed.

For many rural communities, the only available route to provide affordable housing is through rural exception sites. However, Jo notes that there is considerable local variation in the application of this policy. In 2022, just over 50% of all rural exception site completions were in six local authorities.

Yet these bespoke, small affordable housing developments make an invaluable contribution in helping communities to thrive. Jo encourages CLA members to consider whether they have a suitable site within or on the edge of a village – maybe a small unproductive or difficult to farm site, or a corner of a larger field. An RHE or local authority housing enabler can advise on its suitability. Alternatively, a housing association that delivers rural affordable housing in your area can give an opinion.

These sites will never attract the value of land allocated for housing in a local plan, but Jo points out that local plans take years to adopt and there is no certainty that a site will be allocated. Providing a rural exception site offers an immediate opportunity to gain a cash return from the land above agricultural value, potentially providing capital for the farm business or contribution towards a pension pot.

Recognising this, the CLA is working with Jo on a ‘planning passport’ for rural exception sites to make it quicker, less risky and cheaper to gain planning permission on these sites.

Members can contact the CLA for free advice on how to get started delivering rural housing, including free planning and tax expertise.