Planning Laws – Friend or Foe?

Planning laws

Planning laws are often seen as the devil of the piece for developers, businesses – possibly to everyone who has an interest in property – as they impose time delays, costs and restrictions on construction, conversion and extensions.

However, recent changes in planning legislation have demonstrated how these laws create a kind of boundary, which when removed can result in unexpected consequences that have a very real effect on both businesses and the area.

Permitted Development Rights

Permitted development (PD) rights have been around for a long time. They allow residential property owners to build extensions of a certain height, width and depth, subject to some standard conditions, without applying for or obtaining planning permission.

PD rights are also applicable to all kinds of property usage from business to retail to agricultural, and can be suspended or excluded in specific places such as conservation areas or where listed buildings are concerned.

In addition to PD rights, historically it has been possible for one property use to change to another without requiring permission. An accountant’s office can change to a card shop, for example.

Further Permitted Development Rights introduced

In spring 2013, further PD rights were introduced by the coalition government. These allow certain classes of property to be converted to residential use without full planning permission being sought from the local authority. The system works on a ‘prior approval’ basis and the prior approval relates to highways, flooding and contamination issues. Significant external changes may, however, still require planning permission, and this can impact upon some conversion plans as many offices, particularly those built in the second half of the twentieth century, may not convert naturally or easily to residential use, either practically or aesthetically.

In some areas of the country, in small towns or more rural areas where affordable, residential property may be hard to come by, where land is protected as green belt, and business premises lie vacant, the legislation may have been the solution to more than one problem. Nick Boles, the planning minister, stated in respect of the legislation, “These changes will bring empty and underused buildings back into productive use.” The government also wanted to demonstrate that it was making a real commitment to the housing shortage in the UK.

Changing the Landscape

However, it has to be said, that Westminster did not suffer from these issues. And the drive behind a conversion can impact upon the effect it has on the surrounding area. For example, if the landlord or owner’s incentive is to make better use of – i.e. place an occupier in – an empty property, then the benefit to the local area may be fewer empty properties, and more people around, which may in turn draw business and services into the area. On the other hand, the landlord or owner’s incentive to convert may be the higher income or profit that can be made from a building that is used as residential property in comparison with its use as office space, particularly where there is high demand for residential property.

This profit-focused drive to convert then introduces different issues: the change in demographic from a mix of workers and dwellers; the strain on residential services and amenities such as doctors, hospitals and schools – or indeed the problem of a lack of these amenities where residential conversion happens faster than the surrounding area can accommodate; infrastructure pressure, for example, parking and commuting; the lack of variety in terms of local businesses, because what offices do remain are subject to increasing rental costs; the inability of the local authority to control affordable housing and similar issues, usually addressed in the planning process using a S106 Agreement; and fewer employment opportunities in the area.

This was anticipated by many UK-wide councils and boroughs and while 700 applied for an exemption only 17 councils were granted one. Westminster was among the 10 London boroughs granted an exemption, with only one council, the Royal Borough of Kensington and Chelsea, being successful in procuring an exemption that covers the whole borough. In Westminster the effect of the legislation has been significant: over 100,000 square feet of space has been taken out of the office market and placed in the residential market. Given the demand for residential property in the area and the exclusivity of the borough, residential prices remain high, even with increased supply, with flats selling for an average of over £1m, while office prices are also being pushed up because of the squeeze on supply that the legislation has created.

For agents, it is becoming increasingly challenging to find properties in the borough given the rate of conversions to residential, and the legislation is due to remain in place for at least the next two years, during which time residential conversion is likely to continue as leases or lending deals come up for renewal. For developers considering converting newly built offices into residential, in order to avoid the problem of lack of take-up, this legislation will not be applicable since the properties need to have been used as offices prior to the conversion.

Supplementary legislation also came into force last week, which allows retail space (or A2 – provider of financial services) under 150 square metres and agricultural property under 450 square metres to be converted to residential on a similar ‘prior approval’ basis. While the agricultural element will hardly affect the City of Westminster, again, the retail aspect may further increase the levels of residential occupiers in the vicinity and reduce the local facilities.

Given that the legislation is already in place, the situation is to an extent a fait accompli, and if the period during which the PD rights are applicable is extended, the situation could become increasingly critical, not only in Westminster but across the capital. The ever-increasing house prices, which are already excluding many workers – including high earners – from the property market may well continue to fuel the desire to convert business premises to residential properties, changing the face of the area for good.

About the author:

Eugene O’Sullivan is the Director of Morgan Pryce. The comprehensive commercial property search platform & tenant agent for London Businesses. Morgan Pryce have access to every single building available to rent or buy in the London and Greater London area – including Mayfair, Shoreditch and City.

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