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Permitted development rights, which were due to expire in May 2016, will now be made permanent. They will also be expanded to allow offices to be demolished, not just converted, and extended to light industrial and launderettes for new homes. Permitted Development Rights have now been extended indefinitely in a move that’s been welcomed by developers.
A brief history of Permitted Development Rights
Permitted Development Rights were introduced in 2013 as a way to mitigate the UK’s chronic housing shortage, by allowing developers to change the use of office buildings to residential, without having to go through a lengthy planning process. Offices-to-residential Permitted Development Rights (PDR) saw something of a mixed reception. A number of Local Authorities and commentators were fearful of losing valuable office space in key employment areas. However, it was a way to increase the number of residential units in a short space of time, while utilising vacant/unloved office space.
Councils across the country had the option to opt out of the scheme, and 163 councils applied for an exemption. However, just 33 areas were granted an exemption, and most of these were London boroughs.
Since PDR was introduced in 2013 around 7,600 homes have been created from office space. A number of commentators do note that key employment space has been taken away, and that not all of the office units which have been converted were vacant or disused. It can potentially be disruptive to communities who may now lose further employment space with the extension of PDR.
Labour’s London Assembly planning spokesperson Nicky Gavron, added: ‘Allowing property owners to convert offices into flats almost overnight without the need for planning permission is a reckless measure which sacrifices jobs.
‘It results in the wrong types of homes in the wrong locations, and lets developers off the hook with no requirement to contribute any affordable housing. The converted housing does not have to meet affordability, environmental, or disability standards set by local authorities.’
Gavron also raised concern that it is not just disused offices that are being transformed, but that businesses are being driven out to make way for the conversions
Deadline and Extension
Office-to-residential PDR were initially set to expire in May 2016, with confusion over whether schemes needed to be fully implemented and occupied by the deadline to be lawful. Typically planning applications state that a meaningful start must be made within say three years. Once the works have started, there is no deadline in how long you have to complete the works. However, PDR took a different and unusual approach, stating that the works must be complete, and the usage has been officially changed. The drafting of the legislation was particularly vague, and made it difficult for local authorities, developers, and also the lenders Vision Finance works with. Had PDR not been extended, councils would not have had the resources to inspect all the ongoing projects to check whether the works had indeed been completed. Had councils encountered breaches where building work was part completed, we do not know what the developers would have been required to remedy the breach.
As the Home Builders Federation said in its 2015 Spending Review Submission:
“One issue that is currently a concern to house builder SMEs is the permitted development right to convert redundant offices to residential use. This prior approval process was granted on a time-limited basis until May 2016. However, given that the building work must be completed, rather than merely started, before that deadline the scheme has, effectively, already ended since developers are worried that they will not be able to implement the new use prior to the cut-off date, meaning they would not be able to complete the project.”
This fear was rendered void with the scheme’s extension being unveiled within the Housing and Planning Bill, published in early October 2015, which demonstrates the Government’s appetite to relieve the supply and demand imbalance, and create more residential units.
In addition to the continuation of conversions, PDR has also been extended to enable the demolition of offices to make way for residential uses (although this will be subject to limitations and prior approval from local planning authorities), as well as the use of light industrial buildings and laundrettes.
Conclusion
The extension of permitted development rights is of course great news for residential developers, also removing much of the confusion surrounding the deadline which will in turn allow lenders to start lending for these types of schemes once again. Vision Finance work with a number of lenders with appetite to lend on conversion projects under PD, however given the previously impending deadline of May 2016, lenders had altogether been forced to stop lending on PD schemes. This extension now enables Vision Finance to structure and arrange funding for these schemes for our clients once again. Please do call our development finance team on 0207 206 2500 or email developments@visionfinance.co.uk to discuss financing your permitted development scheme.
