Are the latest permitted development rights delivering quality housing?

Back in the spring, I wrote about whether the then government’s amended permitted development (PD) rights rules meant that we might see more office to residential conversions come forwards, with the dual benefit of removing older, obsolete office stock from the market while delivering much needed housing.

In the last six months we have, of course, got a new government – one with big housing ambitions, stemming from a commitment to build 1.5 million homes. We have also started to see more office buildings being sold for PD schemes. For many vendors, this represents a welcome exit route from what had become problem assets. They may not have achieved the price they would have liked – certainly when compared to former ‘up-and-let’ investment value – but it has opened a door to moving on older, obsolete buildings for re-purposing.

A government needing housing delivery, investors wanting to move stranded office assets on, amended policy already in place and a PD sector primed to get converting – a recipe for success, surely?

Earlier generation PDR development pre-dated the era of “wellness” and amenity in real estate development, with daylight just an occasional ‘lucky bonus’, amenity access uncommon and space standards not even considered before rule changes in 2021. Unsatisfactory, unappealing, ill-thought-out homes were the norm.

But as of 2021, PD rules have required adherence to national space standards and tests around noise, daylight and transport. As a result, the quality of PD schemes is now much higher than that of first-generation schemes.

In our post-Covid world, hybrid working and reduced office demand have rendered many office locations obsolete and the ability to repurpose some older office buildings is a swift and relatively sustainable way of recycling existing real estate. Unfortunately, local authority resistance to PD schemes remains.

You might think that local authorities would be receptive to this fast-tracked form of residential development. After all, it allows much more rapid decision making and delivery of much needed housing against big unit number targets. But the tone was set by the Local Government Association back in April, making representations on behalf of its council membership to the then government’s consultation on extending permitted development rights. “[There is] no place in the current or future planning system for permitted development rights,” it said.

It is a strong statement, and it seems this national public sector stance has trickled down to individual councils. Councils are finding ways to resist change of use via the prior approval process and many would-be PD schemes have been stopped in their tracks. Take Hammersmith & Fulham Council in London, which in recent weeks has refused one PD scheme after another. Perhaps some of these applications for prior approval were poorly put together or somehow incomplete, thus deserving of a refusal, but it seems hard to believe that others would not have been well prepared and ticked all the boxes. Yet the council seems to be finding almost any reason to turn down applications, including issues as minor as the distance from a flat to a bin store.

This certainly looks to be a political decision, taken at the highest level, to refuse all PD schemes and force developers to come forward with planning applications instead. Of course, the one big benefit of this is that councils can then demand a proportion of affordable housing, something they can’t do with PD schemes – and this is perhaps what lies at the heart of the problem.

Thankfully, despite the LGA’s position in April, not all local authorities are taking such a negative approach towards PD. What is becoming clear though, is that the supposedly ‘easy’ way to gain consent for a change of use is not always as ‘easy’ as it should be.

So, what can be done to make PD more palatable and put it more firmly on the table as a valuable route to repurpose and re-energise vacant premises at a time when more homes are such a priority?

The introduction of a requirement for an element of affordable in all schemes could be one way forward. This provision would not necessarily need to be on-site, as some conversions may not facilitate this. It could come in the form of payments in lieu, which could be used towards off-site provision. This could help ease the stand-off that exists with some councils, helping to fulfil the new government’s very ambitious housebuilding programme. The downside is that this will impact viability and the price that a vendor of an older office building can achieve, possibly reducing the number of such sales that happen, thus reducing supply.

As I said six months ago, there is still a clear opportunity for ‘office-to-resi’ schemes delivered via modern PDR, but also via traditional, negotiated planning applications, especially in suburban locations that suit housing but increasingly don’t fit the modern workspace mould.

Councils need to play by the rules though, not just issue blanket refusals. A 1.5 million national target is punchy – and it will need collaboration in respect of the structural changes needed in our urban fabric if we are to get even close.