Research by peer-to-peer platform Lendy has revealed that the number of conversions of farm buildings into new homes fell by 20% in 2017.

This has dented hopes that such conversions could help solve the rural housing crisis.

According to Lendy’s findings, just 1,511 agricultural-to-residential conversion applications were approved in 2016/17, down from 1,890 in 2015/16. In addition, local authorities rejected 38% of all applications for converting farm buildings to houses last year.

Lendy believes converting outbuildings such as barns and stables into housing can be an effective way of tackling the shortage of homes in the UK, which is as much of a problem in the countryside as it is in cities.

To put this into perspective, a recent development of eight new houses in rural Cornwall saw over 800 people apply to rent – highlighting starkly the need for more rural housing.

Selling surplus outbuildings to developers looking to convert can help in two ways: one, it makes unused buildings available for new housing; two, selling surplus outbuildings to convert can provide farmers with a vital source of additional income.

As well as a drop in applications and the high number of refusals, developers are also facing increasing difficulty when it comes to accessing funding, with bank lending to property developers remaining low. Consequently, many developers can struggle to finance conversion projects through traditional means.

The fall-off in lending has been quite dramatic. Figures from the Bank of England show that over £34 billion in lending was outstanding from banks to property developers in December 2013, but this dropped to just £14.8 billion in December 2017.

To combat this, more and more developers are turning to alternative forms of finance – such as peer-to-peer lending – to help them build more homes.

“Converting farm buildings is one of the easiest ways to help solve the rural housing shortage, so this sharp drop-off in approvals is very disappointing,” said Liam Brooke, co-founder of Lendy.

“Agricultural-to-residential conversions can be a win-win for everyone – farmers can unlock capital from their land and more homes get built for prospective buyers – helping to close the housing gap.”

He added: “It doesn’t make sense to have so many redundant outbuildings that have no aesthetic value at all slowly decaying when they could be turned into homes. A shortage of bank finance for these conversions is another issue. This is why so many developers are turning to alternative forms of finance like P2P to get viable projects off the ground.”