Summary and implications

The Government recently announced in a letter to local authorities in England that new legislation will come into force in Spring 2013 allowing a change of use from offices to residential without the need to apply for planning permission.

The change will be of interest to land owners and developers because, it is hoped, this new change will:

  • provide additional housing where there is a shortage;
  • encourage economic growth by providing a quick and flexible planning response; • create opportunities for new and start up businesses; and
  • promote vitality in town centres.

Background

The idea was first suggested in the Budget two years ago together with consultation taking place on this issue in April 2011. Opposition halted the proposal until 24 January 2013 when the Government wrote to chief planning officers at local authorities in England to alert them of the legislation coming into force in Spring 2013.

How will the changes be made?

The General Permitted Development Order, which grants permitted development rights, will be amended to authorise the change of use without the need to apply for planning permission.

The new legislation will initially apply for a period of three years, but the Government will consider towards the end of that period whether the new rights should be extended indefinitely.

Constraints

The permitted change will be subject to a limited prior approval process. This is not the same as lodging a full planning application as it will only relate to:

  • significant transport and highway impacts; and
  • safety hazard zones, high flood risk areas and land contamination.

Whilst only the limited prior approval will be needed for the change of use, a full planning application will be needed for any external works that are required to facilitate the change of use including:

  • works that materially affect the external appearance of a building; and
  • other external building, engineering or other works.

However, local authorities will have to act reasonably in dealing with both the prior approval applications and planning applications for external works and not use the processes in a manner that in effect seeks to object to the principle of the change from office to residential use otherwise the authority’s decision could be overturned on appeal by the Secretary of State or a planning inspector.

Additionally, the Government has invited local authorities to write to the Government to seek an exemption for specific parts of their areas where there are exceptional circumstances. It is understood the Government has previously decided that the new rights will not apply to the City of London after significant concerns and lobbying by the Corporation of London in recognition of its status as the leading financial and business district in the UK and Europe. We suspect a significant number of other authorities will seek to follow suit, but many will be refused.

What impact will the changes have?

The Government’s intention is that this new scheme will make the best use of developed sites by allowing existing buildings to be quickly brought back into productive use. The Government sees the measure as an important contribution to assisting the economic wellbeing of the country and that any loss of office premises will be accompanied by benefits in terms of new housing and additional construction output and jobs, which will be felt at the local authority level and wider.

We anticipate that the change is likely to be welcomed by most landowners and developers, but not all. One reason is that the use of office premises as residential for more than a certain number of units (typically 10–15 residential units) under permitted development rights is likely to attract an enhanced value compared with other residential developments of comparable size. This is because the local authority’s planning policies requiring residential developments of such size to provide a proportion of units as affordable housing only apply if an application for planning permission is required. A change of use from offices to residential under permitted development rights will not engage those policies. As a result, large office buildings could be change to market housing without any affordable housing provision or contribution.

Some residential developers who have non-office sites for redevelopment as residential may not welcome the prospect in the short to medium term of competing developments coming on to the market in the locality with the significant market advantage of not having to provide or fund affordable housing. However, we expect these residential developers to also seek to gain from the new permitted development rights.

If the permitted development rights are extended for an indefinite period, this might incrementally over the long term shift a greater affordable housing burden on to other residential schemes.

The change is also likely to be welcomed by landowners and developers where values and returns in respect of housing outstrip those for offices or where the demands of office tenants for high-quality offices are not met by office buildings that may be only a couple of decades old, but would with adaption make perfectly adequate residential properties.

Changes of these offices to residential buildings will assist to some extent with providing the badly needed homes for the country, easing to some extent the national housing shortage. It is by no means the total answer to the housing shortage problem and is not promoted by the Government as if it is.

Conversely, there is a possibility that in some areas office rents might in the medium to long term rise if the measures are extended for an indefinite period and available office space decreases significantly or office tenants in effect are competing for the use of the premises as offices against the backdrop of the owner being able to change the premises to residential use with no affordable housing, less red tape and relatively easy.

Next steps

If you wish to find out more above about the proposed legislative changes, you can view the Government’s letter to chief planning officers at local authorities in England here:

https://www.gov.uk/planning-guidance-letters-to-chief-planning-officers

Local authorities who wish to apply for an exemption have until 22 February 2013 to apply.

The new legislation will then be produced and come into force in Spring 2013.