Many rural councils are in favour of dispersed low density housing as it takes advantage of a country location. They are likely however to increasingly come into conflict with the planning system and with governmental planning policies which favour a planned and dense development. We discuss the degree to which six rural councils on the urban edge have developed dispersed housing as a strategy and how this is addressed in their planning. Five of them have strategies for dispersed housing and used local planning as a means of realizing this goal. Nevertheless, only two had proactive plans to address this strategy. Despite governmental policy to ban dispersed housing, such areas are identified in negotiations between local and regional authorities who then subvert institutional barriers. We conclude that while central planning policy does not seem to constrain dispersed housing, local planning does. Local authorities do however set limits on dispersed housing through sector interests.