How the economic downturn affects rural communities

As the credit crunch hits the home market, BBC rural affairs correspondent Jeremy Cooke looks how the downturn will affect rural areas in 2009

Vanishingvillags-d6a7942

It’s no surprise when you look at the evidence. The ever-growing gap between countryside incomes and property prices means that last year, according to the National Housing Federation, nearly 700,000 people were on waiting lists for an affordable home in rural England.

Advertisement

We all know that the economic downturn and credit crunch mean that house prices are falling for the first time in more than a decade, but that does not mean that rural housing becomes any more affordable. In Dorset, for example, average house prices are more than 15 times the average local income. Even a hefty drop in the value of real estate will not change the fact that, for many people born and bred in the county, the dream of their own home in their own community is as distant a prospect in 2009 as it was in 2008.

The Commission for Rural Communities (CRC) has been asked by the government to monitor the potential impact of recession in the countryside. Housing, or the lack of it, is a key issue. The commission’s chairman, Dr Stuart Burgess, is already making bleak predictions. “Affording a home is going to be increasingly difficult over the next year or so, and this will be particularly acutely felt in rural areas,” he says. “The gap between earnings and house prices has been so great in some rural areas that the situation is unlikely to improve, even with steep falls in prices.”

Dr Burgess sees problems not just for those seeking a new home, but also for rural families who have struggled to buy in the past few years, when prices were soaring. Repossessions, he says, are already happening.

“High house prices have led to some households overstretching themselves and they may now find it difficult to pay the mortgage. But the question is where will they go? Social housing is already in limited supply and is not being increased. There is a real danger that the effects of the recession will result in the further loss of younger households, undermining the future sustainability of rural communities.”

Key workers

It is this social aspect of the rural housing crisis that means our political leaders feel obliged to get involved. The Lib Dem MP Matthew Taylor represents a rural constituency in Cornwall and is in no doubt about what is at stake. For him it is vital that those who work in the countryside – teachers, nurses and police officers, as well as farm labourers – should have homes in the communities they serve.

“If we fail to build affordable homes to enable the people who work in the countryside to live there, we risk turning our villages into gated communities of wealthy commuters and the retired,” he says. “We are in danger of killing the countryside. We are not allowing affordable housing to be built for people who actually work in the community. The schoolteacher, the plumber, the shop worker and the pub worker cannot afford to live in our villages and as a result they are dying.”

Arrested private development

Last year Taylor was commissioned by the government – across party lines – to look deeper into the problem. His review Living Working Countryside called for new planning policies and community-led initiatives to create affordable housing where it is most needed.

During the housing boom of the last decade one of the few ways local authorities could tackle the problems was to insist that new housing developments included some affordable homes. But now Taylor worries that the changing economic landscape means that this tactic is unlikely to be an option in the coming year.

“The credit crunch hasn’t made housing needs go away; affordable housing is now more important and urgent than ever. But the collapse in private development is also causing a huge drop in delivery of affordable homes required as part of these developments. It is essential that the government brings forward funding that it has already earmarked for affordable housing.

“In addition, councils should be encouraged to lease the private properties which people can’t sell, to provide homes to rent for those on local housing waiting lists. It makes no sense for houses to sit empty while waiting lists for social housing increase.”

For families in need of affordable rural housing, things have been difficult – many would argue impossible – for a long time. The National Housing Federation calculates that an average of 14,494 people have been added to housing waiting lists every month for the last four years. Now with the credit crunch, the refusal by banks and building societies to offer mortgages on affordable housing is – for many – yet another setback.

Roland Michell, a builder who grew up in the Cornish village of Just In Roseland, is one of a group of eight mates, most of them builders and tradesmen, hoping to develop a plot on the edge of the village by building their own affordable homes. Roland is still optimistic that, after years of trying, 2009 will see the dream become a reality. But the recession means there are yet more challenges, particularly getting finance.

“We have been battling for years on the planning side of things,” he says. “But now there are problems with money. We all went to the mortgage people early on and they said we were OK. Now some of the companies are sending completed application forms back saying they are no longer in the mortgage game.”

Changing picture

There is no doubt that the credit crunch will affect different housing projects in different ways. In the Cambridgeshire village of Over, for example, there are reports that a development which included some affordable homes has simply been abandoned.

In the village of Bainbridge in Wensleydale, North Yorkshire, a development of 17 two- and three-bedroom affordable homes was completed last summer. The plan had always been to have a roughly 50-50 split between rented homes and split ownership, under which potential buyers could get a foot on the property ladder by sharing ownership with the local housing association. But the problem is that some of the potential buyers have now been refused mortgages which they would surely have qualified for just a few months ago.

It is a clue as to how the affordable housing picture may change in the coming months, and it now looks likely that many of the Bainbridge homes will be rented rather than owned.

Lending a hand?

The project has been developed by the Broadacres Housing Association. Andrew Garrens, its business manager, says the crisis in the mortgage market is squarely to blame. “It’s getting really difficult,” he says. “There are very few lenders willing to lend. And those that are willing to lend are demanding deposits of 35 percent, which makes it completely unaffordable for many of our clients.”

Unless the mortgage market opens up, renting may be the only solution open to those determined to make their home in rural Britain. But even then someone has to build the homes and that seems increasingly unlikely. But wait. There are those who suggest that even in these grim economic times there may be opportunities.

Garrens suggests that hard-pressed builders and developers may be attracted to the affordable housing market because it is a safe port in this economic storm. “Developers are coming to us to help sell properties, and there could be large discounts,” he says. “Some have bought land that they can’t afford to develop, and that could potentially be used for affordable housing.”

It would, of course, be wrong to suggest that the rotten economy is the only obstacle to the development of affordable rural housing. Another key issue is planning.

Those fighting to provide more rural homes for country people often complain that classic nimbyism can stop potential projects in their tracks. In my travels as BBC rural correspondent I have sat with groups of locals who, despite what’s happening to rural communities, remain steadfastly apposed to new affordable housing developments. For these villagers the attitude is that there is no inherent right to live anywhere. They say that they purchased their properties at full market price and any development that reduces the value of their homes is not fair.

Costly contradiction?

In 2008, the then housing minister Caroline Flint complained that members of the Campaign to Protect Rural England (CPRE) have, at times, opposed affordable rural housing schemes even as the group’s national leadership campaigns for more of it to be built.

The CPRE’s president, the author Bill Bryson, sees no contradiction. “The CPRE has long been concerned by the increasingly market driven approach to housing adopted in this country,” he says. “All too often this has led to the wrong kind of homes being built in the wrong place. We believe the answer lies in an approach which is plan-led, based around meeting genuine needs rather than market demand, and which ensures rural communities secure the affordable homes they need.”

Advertisement

And then, from a man known for his humour, there’s a sober prediction for the year ahead. “Evidence suggests that rural areas are being badly hit by the credit crunch, with repossession rates soaring along with waiting lists for affordable homes.”