By Allen Chua
26 July 2017
What exactly is PD?
PD, or permitted development rights enable the conversion of office accommodation to residential use without requiring planning permission from the local authority.
In order to tackle the housing crisis, the previous government introduced temporary permitted development rights for office to residential conversions back in 2013. This became permanent at the end of 2015, allowing applicants to convert existing office accommodation to residential dwellings without seeking full planning permission. Developers are now only required to give a ‘prior approval’ notification. What this essentially means is that the local planning authority is permitted only to consider transport and highways impacts, contamination risks and flooding risks.
The case against PD
PD was enacted and made permanent to release inner-city land for dwelling in order to address the housing shortfall that the country desperately needs. Whilst we see the logic behind this, we believe the method is fundamentally flawed and we see two big issues on the horizon. To put this bluntly, the road to hell is paved with good intentions.
- PD simply does not solve the housing crisis
Under this ‘prior approval’ process, the local authority has no discretion to consider or apply any other planning policies in determining the ‘prior approval’ application. This means that, for example, authorities may not seek to enforce minimum space standards or seek affordable housing contributions.
Figures aggregated by London boroughs indicate that prior approval has been granted for the conversion of more than 7,000 new dwellings in schemes of 10 units or more. If these schemes were put through the existing planning system, they would support the delivery of as many as 1,000 new affordable homes. According to a joint research paper by Savills, Molior, and Oxford Economics, the greatest shortfall in the UK is in the sub-market rent and lower mainstream (<£450psf) sector. Removing PD legislation would thus force developers to contribute to affordable housing or contributions towards offsite provisions, tackling the housing supply shortage head on where it matters the most.
- Quality and safety
We believe the decline of quality and safety in PDs would be caused by the lack of planning scrutiny, fuelled by restrictive existing office designs, and exacerbated by inexperienced developers. Under new regulations, office-to-residential conversions are no longer required to be plan-compliant. Given the lower capital needed to finance smaller schemes, many unsustainable and poor quality schemes have been brought forward by inexperienced and opportunistic developers. However, the local planning authority does not have the power to ensure that these new blocks meet basic standards such as minimum space and adequate light and ventilation. This is a critical concern.
We have touched on the Grenfell Tower tragedy in an earlier blog post, and highlighted that cladding and cavity space were the two main causes of the inferno. It is not ludicrous to suspect that a similar incident at a PD block could be worse, taking to account the legal violation of minimal space requirements. Take an example of a PD scheme in Barnet for instance. Around 95% of the 254 flats in the 11-storey office building would be smaller than the national minimum space standards of 37sqm (398 sqft), with the smallest being around 16sqm (172 sqft). Intuitively, the incidence of fire would be higher with the intensification of electrical appliances within the confines of the building. In addition, forcing residential units into a building originally designed as an office block is potentially fatal. Going back to our example in Barnet, the architect drawings show one single corridor and as many as 37 flats on one floor. We think this is a pressing issue. Post-Grenfell, many local authorities have stated that they were powerless to enforce safety measures on PD buildings as checks were currently conducted by private sector building inspectors approved by the Construction Industry Council instead.
The push to increase the housing supply is coming at the cost of producing poor-quality residential accommodation. This is a recipe for disaster.
In our earlier blog post, we have stated that “nearly 14,500 dwellings have been converted to residential use in the UK since 2013. Potentially, that is equivalent to an additional 120 Grenfell Towers, to add to the 200 or so that have failed fire safety tests to date. And that is before including the 300 or so towers that have yet to be checked.”
The only saving grace is that the approval figures for office-to-residential conversions are coming down. Only 2,922 office-to-residential conversions were approved in England in 2016, down by 10% in the previous year. In London, the number of approvals collapsed by 37%. Only 603 schemes were given the go-ahead, compared with 951 in the first year of the new regulations. This might be a function of political uncertainty, or a convergence between office and residential capital values. Either way, we continue to view office-to-residential conversion as a poisoned chalice, rather than the holy grail that most politicians seem to agree on.