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Lower house price inflation will help country-dwellers the most

Remember the heady days of 1998 when rural issues were being debated virtually every day in the media? Labour had been elected on a manifesto which promised to ban fox hunting and the rural lobby was up in arms. Thousands of people joined the Countryside Alliance to march through the streets of the capital and in a bid not to be painted as defenders of fox slaughterers the Alliance cleverly widened the debate to cover the issues of rural housing, transport and employment.

Fast forward to 2004; still no ban on fox hunting and the affordable housing debate focus shifted to urban key workers. Until last week, that is. That was when the Countryside Agency (which is not connected to the Countryside Alliance) put rural housing back on the map by highlighting the issue in its annual The State of the Countryside report.

“Life in England&#39s countryside is good for many,” explained Agency chairwoman Pam Warhurst at the launch of the report. “More and more people are moving there to live – and why shouldn&#39t they have that choice? There&#39s nothing wrong with wanting a good quality of life but this pressure on the countryside has an unintended impact,” she went on. “Those who exercise their choice to move can reduce the choices of the less well-off in rural areas.”

The report shows that the most damaging impact on people living in rural areas is the increase in house prices, making fewer homes affordable for locals and increasing homelessness in remote areas. Net migration from urban to rural areas was estimated at 115,000 people per year in the 12 months to June 2002. This level of migration has had an incremental impact on the number of people living in the countryside. The report estimates that from 1981 to 2002 the population in rural areas grew by more than 81,000 (0.7%) compared with 48,000 (0.1%) in urban areas.

Many blame the shortage of affordable housing in rural areas on second-homers. The number of people owning two properties is on the increase. The Centre for Economic and Business Research has estimated that the number of second homes will swell from 150,000 now to 340,000 in 2025. Buying a second property has no doubt exacerbated the housing problem in some rural areas but, perhaps surprisingly, by far the largest number of second homes are bought in or near city centres as investments or as residences for those working in towns during the week.

More likely the root of the problem lies in the record house price inflation we have seen in the past few years. This has affected the whole of the country with households on low and middle incomes finding it hard to get a start in the property market. But the impact on rural households has been harder still as there is less available housing stock and family incomes tend to be lower. It is no surprise that the report found that in 2003, 37% of the rural population spent more than half their incomes on mortgage repayments compared with 26% of urban residents.

So what are the policy solutions? Some local councils have already begun to take action. In South Hams, near Plymouth, council chiefs have said that half of all new housing in the district will have to be affordable. Rules have also been introduced to prevent houses for local people becoming second homes for outsiders. Certainly, new housing will be needed to cope with the changes in demographics alone. Given the number of rural properties currently available, a sensible level of extra housing stock provision would help.

However, what will really help alleviate the problem is a slowing down of house price inflation, allowing incomes to catch up with prices.

The BSA is still predicting a gentle slowdown of the market which we believe is in the best interests of all consumers. Prices cannot keep going up at the rate they are now in a low inflation environment. A soft landing will help those who are struggling to afford a property in urban areas. But for those living in rural areas where property has soared from and average £60,000 in 1998 to £140,000 in 2003, it will provide blessed relief.

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