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A Market View of Permitted Development

by on November 25, 2021

Our latest Planning Market Insight Report included a feature from Lambert Smith Hampton (LSH). Below are their thoughts on the effects of the new Permitted Development (PD) rights.

As many across the industry are now aware, new Permitted Development (PD) rights were announced last year, following a major shake-up of the Use Classes Order by MHCLG. ‘Class MA’ is now a permitted development right, to change the planning use from ‘Class E’ (Commercial, Business and Service) to C3 (Residential), meaning applications for prior approval can be made from 1 August 2021.

But whilst there has been a lot of discussion about the potential impact of this, what is actually happening in the market?

Lambert Smith Hampton (LSH) have been at the forefront of the property management and consultancy industry for the past 30 years managing:

  • 7,700 properties managed across commercial, industrial, residential and retail sectors;
  • 15 million sq ft of shopping centres and retail premises;
  • Yearly transactions:
    • 18 million sqft of industrial and logistics
    • 7 million sqft of office space
  • £16bn of property advised on each year.

We have asked our Planning, Regeneration and Office advisory teams what the impact of this has been since the changes came into effect, and what further implications there may be.

The LSH View
The LSH view is that the Government’s drive to deliver housing through changes to the Permitted Development regime may not be having the intended effect on delivery of housing. The reason for this view is that the recent changes are too complex, and the prior approval requirements are now more restrictive. For example, the size of Class E premises that can be converted is now at 1,500sqm which is much lower than the unlimited threshold under the former regulations. There is also a requirement for the premises to be vacant for three months prior to an application being submitted.

The ‘original’ office to residential changes delivered significant levels of housing (of differing quality) but the secondary and tertiary office space which lent itself to these changes has now, by and large, been redeveloped already. We did not see a clamour of clients wishing to secure Office to Residential development prior to 1 August 2021.

The complexities involved in changing the use through the Prior Approval process means that the appetite for such submissions has reduced, with clients being more willing to approach Local Planning Authorities with comprehensive schemes. We have worked closely with a number of clients over the recent months to realise comprehensive development in line with the new regulations.

We also see the Covid-19 pandemic changing the way people are living and therefore altering housing requirements. The demand for small, city centre flats (typically what an office to residential scheme may deliver) is reducing and falling by the wayside in preference of larger units with more space – outdoor space in particular.

Nevertheless, many Local Planning Authorities see the new Permitted Development rights as a threat. Despite central Government amending the NPPF to make it harder for LPAs to introduce Article 4 Directions removing permitted development rights, Property Week undertook some research. This research revealed that almost half of London Boroughs either have applied or will be applying for Article 4 Directions to stop the Class E to Residential taking effect
The national picture is less pressured, although expect many of the urban authorities, especially in the Midlands and the North, to follow suit.

Residential Development Survey
In September 2021, Lambert Smith Hampton launched a Residential Development Market Survey, which the industry about how housing demand can be met, the challenges faced, and where the opportunity lies.

As part of this, and whilst at an early stage, we asked what the likely impact the new PD rights would have on the delivery of homes.

The wider response pointed to the prevailing planning system being the largest single obstacle to residential development. Challenges faced by the residential sector run deep and require fundamental step change in the UK’s approach to housing delivery.

With regards to permitted development, 76 per cent of respondents to the survey felt that PD has had, and will continue to have, a limited impact on the delivery of new homes.

Whilst many commentators suggested that the new Permitted Development rights could result in adverse impacts on the high street and sub-standard accommodation, we have not seen any increase or rise in the number of clients wishing to explore PD as a potential option – with the majority preferring to explore other avenues to realise opportunities with their property assets.

This analysis is part of the Planning Portal Planning Market Insight Report. The Planning Market Insight Report is the earliest source of planning market data available, and each issue features key high-level statistics as well as deeper analysis of a specific sector or topic. To see the full details of this analysis, you can access the full report here. You can also sign up to receive the report directly to your inbox each month.

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