By Guy Murray, Head of Development Finance, West One loans
The Government is introducing a change to the rules around permitted development rights (PDRs), which will make it easier for developers to convert commercial buildings into homes.
Building work usually requires planning permission from the local authority but minor alterations to properties can often forego this through PDRs, for example, building a porch or a small extension.
Last year, PDRs were extended so that larger developments, including renovating office blocks and shops into flats, would not have to seek full planning permission.
From 1 August 2021 the rules will be relaxed even more although there are stipulations. The buildings earmarked for conversion to residential must have been used for commercial, business or service purposes for at least two years and been vacant for a minimum of three months. There is also a maximum floor space requirement of 1,500 sq m.
The PDRs will speed up the amount of time it takes for developers to get their projects off the ground as they won’t have to go through the lengthy planning process. They will still need to make their plans known to the local authority and seek prior approval.
Government figures show that 72,980 new homes were added to the housing stock through change of use PDRs between 2015 and 2020. The strongest year was 2016-17 with 18,890 new homes but that fell by 35% in 2019-20.
Our own experience echoes this as we have seen less PDR work coming through with most of our clients building new flats and houses. This could be because most of the more suitable buildings have already been converted.
However, there has been talk of some office space becoming redundant as it becomes more normal for people to work from home following the pandemic lockdowns. The high street is also changing with shops closing as internet shopping expands. The Government is hoping these vacant spaces could be turned into homes and revive high streets with more residential use.
But these types of conversions must be carefully considered by developers and lenders as well as brokers putting business our way. Older buildings may have hidden dangers such as asbestos and what might have looked like a relatively cheap build at the start could turn into an expensive project.
There has been some opposition to these changes by professional bodies with one of the concerns being poor quality housing. But there are building regulations that developers must abide by such as rooms having enough natural light and space. Rules around unit sizes also exist so if a flat is less than 30 sq m it will not be mortgageable and therefore not saleable.
At West One, our policy is that clients must have experience and completed at least two developments before we will lend to them. And to ensure good standards we will want to be satisfied that developers are building their projects within the building regulations.