Permitted Development Rights And The Uk’s Housing Problem
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Permitted Development Rights And The UK’s Housing Problem

Permitted Development Rights And The UK’s Housing Problem. Hello, everyone. I hope you are well. In today’s post, I will be sharing a guest post from property expert Ritchie Clapson CEng MIStructE, co-founder of propertyCEO. Ritchie will explore Permitted Development Rights (PDRs) and their importance and impact on housing. With the pressure on the government to look good ahead of a general election, PDRs are returning to the fore.

Permitted Development Rights And The UK’s Housing Problem

As we enter the final months of the government’s tenure, a quick review of the political landscape would suggest that each department’s shop window is under pressure to look as attractive as possible ahead of an election. Frankly, in many cases, the cupboard looks a little bare. Heads are being scratched, and nerves are frayed.

My good friends in the Housing Ministry (as was) have decided that the mannequin adorning their pre-election shop window will be sporting a retro look this election, including, as it does, the further expansion of existing permitted development rights. It’s an old design, but the governments looked to shore things up by raising a hem or two here and there, albeit it’s fought shy of adding tassels. But what is permitted development rights (PDRs), and precisely what hem-raising is being proposed?

The World Of Pdrs Is A Little Complex

There are two main types of PDR. The first relates to extending one’s home. For example, subject to certain size restrictions, you can have a PDR to put an extension on the back of your house without asking the council for permission or even telling your neighbours. The second type relates to changing the use of existing commercial buildings, mainly residential ones, and it’s this type that the government tweaks to get more houses built.

According to countryside charity CPRE, some 1.2 million new homes could be built using the country’s current stock of unused commercial buildings, so you can see why Westminster is keen. The government stated that we need to build 300,000 new homes every year, and in recent years, we’ve not gotten anywhere close to meeting that target.

Permitted development represents low-hanging fruit because, let’s face it, wholesale planning changes that could raise the prospect of a new affordable housing estate being built at the bottom of people’s gardens are unlikely to be a vote winner. However, recycling existing commercial buildings is far more palatable to the electorate and allows the government to be seen as addressing the housing crisis.

Decades

PDRs have existed for decades, but they came into their own in 2015 when the government allowed developers to convert office buildings into residential use. Since then, the number of permitted development rights has increased significantly. You can now also convert gyms, doctor’s surgeries, light industrial units, banks, cafes, and restaurants into residential units and add new storeys to existing blocks of flats.

All buildings have a use class, and you would typically need to apply for planning permission to change a building’s use class, e.g., to turn an office building into a block of flats. Because applying for planning permission can be slow and tortuous, the government decided to create a streamlined process whereby the change of use was automatically approved, subject to some basic checks.

Called ‘prior approval’, developers can make a PDR application for a change of use, and the council would have up to eight weeks to assess it against a short list of fundamental criteria. Permission was automatically granted if they didn’t respond, making things much quicker and far less risky for developers.

So, What Exactly Is Being Proposed?

The government made several changes to the current PDR arrangements to woo voters. On the home front, it’s looking to let homeowners build wider and taller extensions, including wraparounds, loft conversions, and kitchen extensions, without planning permission.

They also plan to scrap rules that dictate a home’s size and that any extension cannot take up more than 50% of the land surrounding it. This will allow homeowners to convert as much loft space as they like, again, without needing permission.

Since the announcement, there’s been a fair amount of doom-mongering, with certain sections of the media predicting pitched battles between neighbours. There will be instances of neighbourly objections, but housing is an omelette where egg-breaking is necessary to move the needle.

I think most will see this as a sensible proposal. Moving home is prohibitive for many and is currently subject to the dreaded stamp duty. Having the option to extend one’s current home substantially is an attractive proposition for many people.

Proposals

The government is also looking to change the commercial conversion side of PDRs. Many commercial properties must be vacant for three months before PDRs can apply, and the government Is proposing to remove this restriction. This is excellent news for developers because it means they can start developing more quickly and with greater certainty. It also means they can secure the finance they need to acquire the property they’re about to convert.

The government is also proposing to lift the 1,500m2 maximum size restriction on commercial properties that can be converted under one of the most significant PDRs. Given that a 1,500m2 property would equate to around thirty one-bedroom apartments, we’re talking about a project far more significant than most first-time developers would look to take on. However, should the maximum size restriction be removed, more prominent sites may become attractive to more significant developers.

Not Out Of The Woods Yet

So, while all of these proposed changes sound positive, they won’t be the magic wand that fixes the housing crisis alone. Yes, it’s easy to see that building 1.2m new homes from unused brownfield land will give us the equivalent of four years of new housing. And we won’t need to touch our beloved green belt to do it. But the question is, who will be doing all this development? That’s where we hit a snag because brownfield projects are unsuitable for the major housebuilders.

If we look at the Persimmons, Barratts, and Taylor Wimpey of this world, they have a simple, cookie-cutter model which involves rolling out standard house designs on empty building plots. Give them a plot of land anywhere in the country, and they can build some houses from their existing designs, and they’ll make a tidy £ multi-million profit for their troubles. But give them an unused commercial building, and the model doesn’t work.

They could, of course, demolish it and start again, but that’s considerably more expensive than building on virgin land. If they were to convert what’s already there, they’d have to employ architects to create a one-off design for every building. They’d also have to retrain their workforce since converting an existing building requires a different skill set than building a standard design on a vacant plot. Finally, most of these sites wouldn’t make them enough profit – they’re not big enough.

Who Will Build?

So, who is best placed to convert these buildings if the scale housebuilders are out of the frame? The answer lies with the much smaller operators, known as small-scale developers. These range from individuals like you or me to relatively small SME enterprises. Putting some flats above an unused shop can net you a six-figure profit in relatively short timescales. It’s not very exciting to Persimmon, but it’s highly attractive to an individual landlord, investor, or entrepreneur, experienced or otherwise.

The government relentlessly persecuted property investors over the last decade; however, it now needs to encourage new small-scale developers to enter the market. SME developers used to account for 30% of new housebuilding, but today, that figure has dropped to just 12%.

There’s also another critical challenge. The local planning authorities that must give prior approval to PDR applications before works can begin are massively under-resourced, often lacking in experience (due to many senior planners departing), and not predisposed to PDRs, which they often see as undermining their authority.

As a result, councils still find it difficult to get prior approval despite the government’s intention to streamline and bureaucratize PDRs. It’s imperative that the government put planning authorities on their side and start reinvesting in this vital area.

Summary

The proposed PDR changes will undoubtedly create more opportunities to unlock more housing by recycling and improving our existing building stock – which must be good. However, this will only happen if the government encourages new small-scale developers to come to the party and return to where they account for a larger market share. They also need to get local planning authorities on the side to view PDRs as an opportunity to solve the housing crisis in their area rather than something that undermines their authority. The retro look certainly has its appeal, but we may need those tassels after all.

I hope you enjoyed that.

Talk soon

ABOUT THE AUTHOR

Ritchie Clapson CEng MIStructE is a veteran property developer of 40+ years, an author, industry commentator, and co-founder of the leading property development training company propertyCEO. Ritchie is passionate about tackling the lack of housing in the UK and helping ordinary people to be part of the solution. To discover how you can get into small-scale property development, visit https://www.propertyceo.co.uk

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Working with Strong women, I help empower women not to give up on their goals and find true happiness within themselves. #lifestyle #womenempowerment #selfcare

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