With office vacancy rates running as high as 21 per cent in some regions, Ministers now believe there is a strong argument for allowing change of use for empty office buildings into homes.
According to the Financial Times (Tuesday 22nd January), planning minister Nick Boles is to announce a new “permitted development right”. This will allow many offices and office blocks to be turned into residential properties, without the need for any permission. At this stage however, it seems the changes will not apply to shops or industrial warehouses.
The idea was first mooted around two years ago by Prime Minister David Cameron when he talked of liberalising the planning system, which is all part of the government’s long-term policy of removing bureaucracy and “red tape” from a whole range of government rules and regulations. This move, if enacted, would free-up the change of use rules governing whether buildings have to be industrial, office, retail or residential.
Under the system as it stands, getting the necessary permission to convert say a large London office block to residential use can be fraught with difficulty, time consuming and the costs can run into millions of pounds in legal fees.
Under these new proposals developers will be in a position to convert office buildings into blocks of flats without the need to seek the local council’s permission. This would be a quite radical change to the English planning system, a move which is primarily designed to speed up the delivery of new homes.
With new-build figures at an historic low since the “credit crunch”, this scheme aims to quickly increase the UK’s housing supply at a time of increasing demand, which in some areas is pushing up rents and property prices to record highs.
The combination of under supply and banks’ reluctance to lend on new mortgages has pushed up rents to more than 50% of earnings in some central locations, and the average age of unassisted first-time buyers to an all-time high of 33. This is according to figures supplied by the Council of Mortgage Lenders.
It is thought likely that a rule change such as this will trigger a wave of conversions, particularly in central London, where residential property values have soared during the past five years. In the West End residential property values per square foot are well above those of office stock.
However, the proposals have caused some consternation in the City of London, where the authorities are resisting this change. The City authorities argue that once the financial services industry picks up again it would be impossible to undo many hundreds of long-term residential leases, once they are established, as many run to over 100 years or more.
However, it appears likely that some concessions will be available in the City, where these proposed new rules would not apply.
Read the Full LandlordZONE Newsletter – January 2013 here: www.landlordzone.co.uk/update/january13.html