Developers are managing to dodge building tens of thousands of affordable homes in rural areas where they are most needed because of a legal loophole in planning laws, according to research by the homeless charity Shelter and the Campaign to Protect Rural England (CPRE).

The findings of a hard-hitting report by the two organisations will place added pressure on the housing, communities and local government secretary, Sajid Javid, to announce a tightening of the rules in a speech he is to deliver on Monday on how to change planning rules to tackle the housing crisis.

While developers are required by local authorities to provide a proportion of affordable homes – often about 30% – in any new development, many use “viability assessments” to negotiate down the number by arguing that the requirement would adversely affect their profit margins.

Last year Shelter conducted research showing that the use of viability assessments in 11 local authorities across England contributed to 79% fewer affordable homes being built in urban areas of England than would have been if local rules had been followed to the letter.

Now, with the CPRE, the charity has carried out studies highlighting the same problem in rural areas where prices are often high but wages low, meaning local residents and workers find themselves priced out of the market.

Looking at eight rural councils over one year, the analysis shows that half the affordable homes which councils were required to build were lost when viability assessments were used by developers.

Polly Neate, Shelter’s chief executive: ‘Developers are using this legal loophole to overpower local communities.’ Photograph: Martin Godwin/Guardian

Developers were using viability assessments to argue that meeting set ratios of affordable homes would cut their profits to below 20%, at which point they have the legal ability under current law to negotiate to reduce how many they are required to build.



The two organisations say that developers often deliberate over paying for land on which to build in the knowledge that they can use the system to at least recoup the extra cost by driving down the amount of affordable homes they are required to build.

Shelter and the CPRE have called for urgent action by Javid as part of a rewrite of the national planning policy framework.

Polly Neate, Shelter’s chief executive, said: “With this new research we can see for the first time the true scale of our housing crisis – it’s not just blighting cities but our towns and villages, too. Developers are using this legal loophole to overpower local communities and are refusing to build the affordable homes they need.”

Crispin Truman, the CPRE’s chief executive, said: “CPRE is calling for urgent action from the government to close the loophole to increase the delivery of affordable housing, otherwise rural communities risk losing the young families and workers which they need to be sustainable.”

One area covered by the study is the south-west, where high housing demand from people seeking to buy second homes and people looking for a place to retire results in homes often selling at more than nine times average earnings for the area.

The report says that despite this huge affordability gap developers have still been able to exploit the loophole to cut the number of affordable homes that would have been built if they had stuck to the local authority policy.

“Cornwall missed out on 232 affordable homes where viability assessments were submitted so that these sites will deliver just 26% affordable housing when they would have delivered 40% if local policy had been followed,” the Shelter/CPRE report says.

“In one example, a land promoter succeeded in eliminating affordable homes from a Redruth scheme on the grounds it was not financially viable, reducing the quota from 40% of the development to zero – before going on to advertise the land as an attractive development opportunity with a guide price of £1.3m.”