A backwards step on Permitted Development?

— A backwards step on Permitted Development?

A briefing by Alex Morton for the Planning Change project

September 2018

planning change Planning Change, a research initiative of The Project for Modern Democracy, was set up to consider the radical planning reform needed to enable more homes to be built while maintaining essential countryside protections. It will look at the fundamentals of planning policy, tracing the history of planning controls and subsequent reforms, examining how new housing has been provided over the past few decades, and assessing the scale and nature of the demand for affordable housing.

For more information see www.p4md.org/planning.

the project for modern democracy The Project for Modern Democracy is an independent, non-party think tank set up in 2014 to promote more efficient government and good citizenship. For more information, visit www.p4md.org or contact info@p4md.org.

The Project for Modern Democracy is a company limited by guarantee (no. 8472163) and a registered charity in England and Wales (no. 1154924). Its registered address is 50 Broadway, London SW1H 0RG.

the author Alex Morton was Special Adviser to former Prime Minister David Cameron for two and a half years. He focused on housing, planning, and local government and drafted the 2015 Conservative Manifesto on these areas. Prior to working in No. 10, he led on housing and planning at the Policy Exchange think tank. He has also worked in the civil service Fast Stream and in the House of Commons.

feedback We invite comments on this briefing and suggestions for further research. Please contact Alex Morton at alex.morton@p4md.org.

A BACKWARDS STEP ON PERMITTED DEVELOPMENT? Making it easier to change from office to residential use through Permitted Development has been a policy success which has increased housing supply – but the reform is under threat.

permitted development means more homes with limited political drawbacks In our system, planning permission is normally required to ‘develop’ anything or any ‘development’. Such ‘development’ includes changing the use of a building – for example, changing an office to a home.

Since 2010 the Government has liberalised some changes by making them ‘Permitted Development’, which means that they do not require planning permission – the development is ‘permitted’.

The extension of Permitted Development (PD) to allow buildings to switch more easily from office to residential use took place in May 2013, with expansions allowing greater use of retail to residential following in May 2014, agricultural and warehouse to residential in April 2015, as well as light industrial to residential in October 2017.

In all cases some safeguards remain, particularly building regulations, which are designed to ensure the building is suitable for human habitation.

this policy has been a strong success This is particularly true in terms the number of homes, and greenfield protection: Number of homes

• The total number of homes created by changing building use rose from 12,520 in 2013/14 to 37,190 in 2016/7.1 This makes up 17 per cent of the new housing supply.

• From 2014-17 as the number of homes rose steadily the numbers of homes provided by this policy totalled around 88,000 homes – or around half the housing supply for a single year.2 1 DCLG. 16 November 2017. Housing supply; net additional dwellings, England: 2016-17. p. 5. Available at: https://assets.publishing.service.gov.uk/ government/uploads/system/uploads/attachment data/file/659529/ Housing Supply England 2016-17.pdf 2 See footnote 1 above

a backwards step on permitted development?

• If the homes that this policy has delivered since 2014 were collected together in a single town or city it would be bigger than Oxford or Exeter, and roughly the size of Bournemouth.3 • Had this increase not occurred the Government would not have hit its housing target last year of 200,000 homes, and would delivered just 192,750 new homes, not the actual figure of 217,350.

• This is particularly helpful in London. The GLA’s latest annual monitoring report showed that across the Capital in 2015-16, 19 per cent, or 6,530 homes, were provided under change of use.4 Protecting greenfield land

• Given the average density of new homes, this policy has protected 2,750 hectares of greenfield land.5 • As noted above, this is an area larger than Oxford, Exeter, or around the size of Bournemouth. If the homes it provided were a London borough the borough would be 50 per cent bigger than Hackney.

The total change of use figure for the number of homes this policy generates is more accurately a reflection of the policy’s impact, because often to make a change of use more profitable, changes that do require planning permission are desirable, (e.g. major external building work to enhance the building and sale or rental value).6 Property owners can go to the council and argue if they are not given planning permission, they will use permitted development to change the use.

The council and property owner will come to an arrangement and planning permission is granted, whereas before the council would simply reject such a proposal. In terms of the national split, 18,887 were created under PD and 18,303 from change of use with a planning permission – so around 8.5 per cent of total supply from each strand.

This paper will focus on office to residential, which has been by far the largest element of change, though the principle extends across all areas. Where data exists, 17,751 out of 18,887 homes gained under PD in 2016/7, or 94 per cent, were from switching from office to 3 https://www.gov.uk/government/statistical-data-sets/ live-tables-on-dwelling-stock-including-vacantsTable100: numberofdwellingsbytenure&district,England 4 Greater London Authority. July 2017. London Plan Annual Monitoring Report 2015/16. p. 78. Available at: https://www.london.gov.uk/sites/default/files/ amr 13.pdf 5 Averagenewdensityis32addressesperhectare?seelandusedataavailableathttps: //assets.publishing.service.gov.uk/government/uploads/system/uploads/ attachment data/file/712316/Land use change statistics England 201617.pdf 6 Planning Portal. Change of Use: Planning Permission. Available at: https:// www.planningportal.co.uk/info/200130/common projects/9/change of use/2

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a backwards step on permitted development? residential use.7 There is no reason to believe this figure would be substantially different among wider change of use.

Permitted Development is an effective and comparatively simple way to repurpose outdated buildings – mainly offices from the 60s and 70s that no longer meet modern needs. It is also largely uncontroversial with the public, unlike many other aspects of planning and housing at the moment. The policy of office to residential permitted development has received widespread support, both at the point of introduction in 2013 and at the government’s extension of the policy in 2015.

Rhian Kelly, director for business environment at the Confederation of British Industry (CBI) said that ‘This move towards more rapid development will get better use out of underused office space and support the construction industry.’8 Melanie Leech, chief executive of the British Property Federation (BPF) said that ‘[w]e have long championed the extension of office-toresidential PDR, believing the policy to be a useful tool in breathing life back into underused commercial space.’9

if change of use supply falls housing supply overall might go backward If change of use were made more difficult, there is a real risk that housing numbers might fall from 2018/19 to 2019/20. If change of use went back to 12,590 dwellings a year, as seen in 2011/12, this could leave a shortfall of over 24,600 dwellings a year.10 Given that, in 2016-17, office to residential comprised 93.9 per cent of all dwellings delivered under permitted development rights where measured, and these made up 37,000 homes, the importance of this policy in helping to national housing targets should not be underestimated.11 Currently new build figures show no increase in housing totals – in 2017, work started on 162,180 homes compared to 163,240 completions.12 Therefore, if the number of conversions fell, the net housing supply figure could fall.

7 DCLG. 16 November 2017. Housing supply; net additional dwellings, England: 2016-17. p. 5. Available at: https://assets.publishing.service.gov.uk/ government/uploads/system/uploads/attachment data/file/659529/ Housing Supply England 2016-17.pdf 8 The Architect’s Journal. It’s official: Government announces offices to residential permitted development right. 24 January 2013 9 November/December 2015. UK Permitted Development Rights: Reaching for the converted.

10 DCLG. 16 November 2017. Housing supply; net additional dwellings, England: 2016-17.

11 DCLG. Housing supply; net additional dwellings, England: 2016-17 12 Table 213 House building: permanent dwellings started and completed, by tenure1, England (quarterly)

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a backwards step on permitted development?

the initial exemptions and rules around permitted development While the Permitted Development policy liberalised this area it did not remove all rules. Building regulations, other permits, what were termed ‘prior approvals’ that had to be assessed by the council on transport and highway impacts, contamination and flood risks, and some wider exemptions remained. The wider exemptions around office to residential were laid out in two letters. The first was from the Chief Planner, Steve Quartermain, to all English planning authorities on 24 January 2013, when the PD right was originally announced. It stated they required ‘exceptional circumstances’ where their introduction would lead to: A. the loss of a nationally significant area of economic activity, or B. substantial adverse economic consequences at the local authority level which are not offset by the positive benefits the new rights would bring. If you propose to request an exemption it must relate only to the geographical area justifiable in the light of the above criteria.

Five months later, when the policy came into force, the number of exemptions granted by the Government was small, and they are now due to expire in May 2019.

a backlash from those who dislike the loss of control Despite its practical and political success, liberalising change of use has always been unpopular with many local authorities and the more centralising elements of the planning profession, who resent their loss of control over any aspect of the system, especially – it seems – in London. In February the Local Government Association published a paper on PD conversion of offices, calling for it to be scrapped nationally. Complaints against change of use fall into three categories: 1. Shortage of business space 2. Lower affordable housing 3. Unsuitable homes These concerns are (broadly) unjustified: 1. Shortage of business space. Overall, there is little if any sign of a shortage of space for business, even in London. Since 2014, according to the GLA Annual Monitoring Report 2017, new offices

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a backwards step on permitted development? starts in the Capital averaged 720,000 square metres a year, substantially above the 10-year average of the last decade.13 And this at a time when, as the AMR also explains, the market for London offices has been “mixed”, with take up somewhat below the long-term average.14 2. Lower affordable housing. The complaint PD means local authorities missing out on affordable homes because PD schemes do not have to pay Section 106 contributions towards them is unrealistic. Dubious calculations like simply applying the local plan policy to PD are unrealistic (as done in a report for the RICS), since many of the homes produced by PD have, as conversions of older buildings, been at the lower end of the price scale anyway, and the cost of conversion means there would be little or no surplus left to pay for PD. In addition, as noted earlier, where changes to the property do require planning permission a Section 106 payment can be made.

The Government has recently undertaken an assessment of developer contributions which found that out of 15,166 permissions with a developer contribution, just 395 were related to permissions related to change of use, or around 2.5 per cent .

This is just less than one in three of the 8.5 per cent that change use through a permission more widely – showing that most change of use proposals are unable to contribute.15 Therefore, only a similar number of those which required prior approval could make any contribution and given the points above it is also likely that these will generate a smaller contribution than the typical new build property.

3. Unsuitable homes. Offices would need to be of a standard suitable for light and ventilation for office buildings to start with and as part of their change comply with building regulations, and often other rules such as listed building consent, or environmental permits.16 As previously noted, in many instances, developers must also receive prior approval from the council in relation to the transport and highways impact of the development, contamination and flood risk on the site. Despite these requirements, office to residential PD has raised concern amongst some as to the suitability of new units for human habitation.

But homes must comply with building regulations. Often such complaints focus on size of unit in London – but the smaller size 13 Greater London Authority. July 2017. London Plan Annual Monitoring Report 2015/16. p.g. 37.

14 Greater London Authority. July 2017. London Plan Annual Monitoring Report 2015/16. p.g. 39.

15 MHCLG. March 2018. The Incidence, Value and Delivery of Planning Obligations and Community Infrastructure Levy in England in 2016-17.

16 MHCLG. Guidance: When is permission required?

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a backwards step on permitted development? of such properties is largely down to the general housing crisis in London – and solving this by restricting housing supply is absurd.

4. If the Government were absolutely determined it should undertake a survey on what issues might arise in relation to permitted development and then consult on changes to the prior approval regime.

the threat to change of use part i – at local and london level The main way local authorities can resist PD rights is by imposing Article 4 directions. An Article 4 direction allows a council to withdraw the PD right across a defined area. It can cover any area and remove such rights permanently. The Secretary of State can revoke an Article 4 direction – but they are not required to approve one, meaning councils can do this as they see fit unless checked.

The Government’s own advice states that ‘there should be a particularly strong justification for the withdrawal of permitted development rights relating to. . . cases where prior approval powers are available to control permitted development.’17 Despite this, Article 4 use is about to increase significantly, especially in London: 1. Sadiq Khan’s new Draft London Plan (Policy E1) tells Boroughs to consult on introducing wide-ranging Article 4 Directions preventing PD conversion of offices to residential across both inner and outer London. This is a huge shift – particularly since local councils in London are meant to draw up local plans ‘in general conformity’ with the London Plan. Effectively this will encourage councils to halt office to residential conversion. The publication Planning Resource commented that: The draft plan goes further than its predecessor in its level of protection for office space. The plan says that ‘existing viable office floor space capacity in outer and inner London locations’ should be ‘retained’ and supported by article 4 directions to remove office-to-residential permitted development rights ‘where appropriate’.

Russell Smith, an associate in consultancy Savills’ London planning team, says that the policy ‘could be interpreted as blanket protection of office floor space across London.’

2. In part, Sadiq Khan has been encouraged by various London boroughs setting out that they will severely restrict change of 17 MHCLG. Guidance: When is permission required: article 4? Available at: https:// www.gov.uk/guidance/when-is-permission-required#article4

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a backwards step on permitted development? use and a lack of Government response. In September, Kensington and Chelsea proposed a borough-wide Article 4 Direction to prevent any office to residential PD when RBKC’s current exemption expires next year. In January Westminster, which has a large part of its area – though not all – exempted from office to residential PD as it falls in the Central Activities Zone, followed Kensington in proposing a borough-wide Article 4 to take effect when that ends next May. In February the City of London announced it will follow Kensington and Westminster and introduce a borough wide Article 4 when its exemption also ends next year. At no point has the Government pushed hard on this and sought to see if a less restrictive set of proposals might be suitable.

the threat to change of use part ii – sweeping change All of the measures eroding the office to residential PD would pale into comparison with a change in central government policy. If MHCLG were to accede to calls for the removal of permitted development rights, housing shortage in England would be significantly deepened, putting greater pressure on green belt land whilst wasting the opportunity to regenerate disused sites and neglected areas.

these changes should be reversed We argue these changes should be reversed. Change of use should not be seen as a partisan issue but one on which all parties can agree on sensible reform:

• The Mayor should reverse his changes in the draft London Plan to avoid reducing the number of homes being created in London from change of use.

• If this does not happen the Government should seek to issue a Written Ministerial Statement or guidance and make clear that they will enforce Article 4 Directions very carefully, ruling out those which are not clearly necessary, given how far change of use contributes to new housing supply.

If no action is taken either by the Mayor or Government, this could lead to other councils up and down the country also moving against change of use and restricting the policy in their area. At a time when we need new housing supply more than ever, this would be a change for the worse.

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