Estate Diversification and its Effect on Rural States in the UK Over the Past 20 Years
Literature Review
In the 21st century, rural regions in England confront various challenges. Reductions in funding have led to diminished public services, exacerbating the growing disparity between housing costs in rural areas and income levels in developing regions. Furthermore, the absence of internet access hampers rural communities’ social and economic progress.
These challenges are primarily attributed to the influence of landed estates throughout the UK (Marsden & Sonnino, 2008). This literature review centres on the consequences of rural diversification in the UK over the past two decades. It consists of three sections exploring diversification, landed estates, and the repercussions rural communities face.
What is driving investment decisions?
In 2008, local planning authorities criticized the Taylor Study of Rural Economic and Affordable Housing, which aimed to assess the potential for further expansion in villages. The study identified what Matthew Taylor termed a “sustainability trap”, resulting from a limited approach to defining sustainable development sites (Taylor, 2008).
Landed estates refer to properties generating income for owners without necessitating their employment (Houston, 2014). Despite specific concerns, the agricultural sector has an optimistic outlook, with forward-thinking farms preparing for a sustainable future.
Despite short-term uncertainties, notably related to Brexit, opportunities for growth are evident. Astute property owners capitalize on favourable investment markets, diversify their businesses, and adapt to shifting leisure habits (Houston, 2014).
While risks require careful definition and consideration, many landowners invest in expanding their portfolios and leveraging favourable terms for long-term business transactions (Jones, 2018). The prevailing low interest rates are expected to remain conducive for investments.
Diversification plays a pivotal role in this sector, with landowners seeking to broaden their revenue streams. Ian Baker, Barclays National Head of Landed Estates, underscores the importance of diversification in mitigating risk and enhancing return on investment (di Belmonte, 2017).
Diversification prompts the acquisition of larger land plots, although this may not necessarily translate to a significant increase in total land ownership. Many landowners explore new asset types, including commercial properties beyond their primary residences, signalling a shift in mindset (di Belmonte, 2017).
Investment decisions are driven by various factors, including return on assets and return on equity. While taxation is not a primary concern for landowners, they consider the tax implications of their investment decisions (Bilicka, 2019).
Landowners remain committed to their social responsibility, aiming to provide quality housing, infrastructure, and employment opportunities across generations. They are willing to allocate a portion of their returns to fulfil this social obligation (Bilicka, 2019).
However, social responsibility and financial returns are not mutually exclusive. Landowners explore opportunities in renewable energy, affordable housing, and job creation to align with these dual objectives. Additionally, they address labour shortages through increased apprenticeships facilitated by workforce automation (Bent et al., 2016; Edwards, 2011).
In summary, landed estates in rural areas borrow for various reasons, including diversification, asset enhancement, low-interest advantages, and investments aligned with social obligations (Bilicka, 2019).
Landed Estates are Becoming More Professional
Professional property directors and administrators now play an increasingly vital role in property management, and high-performing individuals are in high demand. Forward-thinking property owners seek the best talent to manage their land, creating a more dynamic labour market (Brown, 2020).
Chief Financial Officers (CFOs) are now employed in land management, bringing a unique approach distinct from traditional property management. Their roles emphasize financial management, benchmarking, and auditing, further enhancing the focus on increased returns. However, the industry faces challenges related to technical accuracy and succession planning (Gore, 2011).
While financial aspects are typically well-handled by legal and tax experts, family planning remains a concern for many property owners. Developing a strategic family plan is crucial to ensure that individuals are aware of the criteria and can align their lives accordingly (Davies, 2007). Property owners aim for a property that yields a reasonable return when transitioning, ultimately increasing the overall value compared to the initial purchase (Morris, 2005).
What does the future look like?
The real estate industry is still predominantly owned by individuals who have achieved success, albeit with evolving definitions of success in today’s society. This has brought diverse personalities into the industry, each with unique perspectives on land ownership and life itself.
The Impact of Landed Estates on Rural Areas of England
Across the UK, more than 2,000 villages are excluded from the planning process, often deemed “unsustainable” due to their lack of essential public services, such as post offices. However, several factors have contributed to the perceived unsustainability of these areas (Shucksmith, 2012).
Landed estates cast significant shadows over rural regions as property owners increasingly invest in this property type, leading to diversification efforts (Shucksmith, 2012). Unsustainable villages lack accommodation options and limited resources for growth, perpetuating a cycle of decline. Sustainability assessments gauge villages against criteria reflecting services and resources that align with earlier generations’ lifestyles (Tien et al., 2019).
Most rural councils establish settlement hierarchies in their local plans, outlining each settlement’s facilities. Biodiversity assessments are conducted to create these hierarchies, with local authorities specifying services deemed essential for a sustainable settlement. These designations are integrated into the municipality’s plan (Ammons, 2014).
Research on labour agreements has revealed variations in hierarchies established a decade ago, raising questions about transparency as resource allocation differs. Settlement categorization relies on points earned, with higher-scoring settlements holding higher positions in the hierarchy. However, housing allocation often favours high-ranking towns and villages, resulting in a shortage of new homes in lower-ranked areas (Snell, 2018).
Among 70 councils, 26 do not label villages as ‘unsustainable’ in their local plans, suggesting a significant discrepancy with the collective agreement. Housing allocation for the 2,154 identified individuals varies significantly based on local plans and economic growth considerations (Raum, 2018).
Broadband and Sustainability
Surprisingly, only 18% of local authorities consider broadband access when assessing a settlement’s viability. Broadband access significantly impacts rural diversification, reducing isolation and providing access to essential services, including banking, shopping, education, healthcare, networking, employment, and entertainment. Internet usage for goods and services is higher among rural adults (51%) compared to urban users (44%) (Pant & Odame, 2017).
Transport and Sustainability
Nearly all city authorities acknowledge that excessive reliance on automobiles compromises the sustainability of communities. Evaluating bus transit options becomes crucial, as public transit connections can facilitate access to essential services in a more environmentally friendly manner.
Despite the fear of legal and technical complexities, many rural areas face higher housing costs than local incomes, forcing residents to move closer to their workplaces. City planning strategies should incentivize housing construction near job centres to reduce commuting-related carbon emissions (Evenson et al., 2017).
What Happens to Rural Areas?
In reality, housing allocation in rural areas is a complex process. Settlement hierarchies strongly dictate housing allocation within these settlements. The only option for settlements categorized in the collective agreement is the construction, reconstruction, or transformation of buildings within their existing boundaries, in exceptional rural locations, or designated sites for small-scale development.
To address housing needs, villages excluded from the urban planning process must either engage in a neighbourhood plan or seek alternative solutions. Locals emphasize the importance of encouraging self-development through urban plans or identifying unique attributes of villages to attract development.
However, this strategy has not yielded sufficient outcomes at a national level. Some municipal councils are proactive in addressing housing needs in small rural areas.
Reduction in Social Capital of Rural Communities
Social capital refers to the network of connections among individuals within a community, enabling efficient societal functioning. Unfortunately, the planning system often overlooks the concept of “social capital” when addressing rural development. These community connections and informal support networks, particularly crucial in sparser rural areas, are vital in sustaining support systems, especially when government resources are scarce (Bibby & Brindley, 2013). In 2011, the Office for National Statistics (ONS) conducted a study on the social capital of rural societies.
Rural residents exhibit higher levels of confidence in their community members (79% compared to 62% in urban areas). They believe people in their place are willing to support their neighbours (80% compared to 66% in urban areas). Additionally, they feel safer walking alone in their environment after dark (81% compared to 70% in urban areas) and have a stronger sense of belonging to their region (71% compared to 60% in urban areas).
While various factors lead people of all ages to leave their rural communities, the availability of housing plays a crucial role. When homes are not constructed in unsustainable areas, these communities will likely have fewer social resources to support the next generation (Pateman, 2011).
Current planning guidance recognizes that facilities in one settlement can benefit residents in another. For instance, residents from different villages may utilize a shared post office. This interdependence demonstrates that settlements need not be entirely self-sufficient, functioning in two complementary ways.
The loss of jobs in a village has a correspondingly negative impact on the sustainability of the community. While clustering can benefit utilities, it is less efficient for housing. Caregivers who must travel to attend to family members or neighbours may face challenges. Preserving these relationships by providing homes in the same vicinity is essential for maintaining social resources in rural communities.