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Commercial to residential – is it the future for the high street?

  1. 19 April 2021
  2. By Jeremy Greer

We consider the Government’s plans to make it easier to convert unused commercial buildings into residential ones, and what it means for the UK’s high streets.



If there is one sector of the economy that has been more affected by the pandemic than any other, it’s hospitality, retail, offices and other commercial buildings.

With restaurants, bars, shops, cinemas, theatres and cafes closed for a significant chunk of the last year, and many offices closed or at much-reduced capacity as most people have been working from home, the already fragile high street has been dealt blow after blow.

The high street was already in decline even before the pandemic, as can be seen by the number of major retailers who have gone out of business in recent years, but this trend has been supercharged by Covid-19, particularly in major cities.

While some local areas have experienced a boom, when things have been open, usually busy town and city centres have seen a dramatic fall in footfall and vibrancy.

Many have suggested one way of reviving the high street and bringing people back to big towns and cities post-Covid, is to convert commercial buildings without a use into new homes. This, they suggest, will help with the UK’s chronic supply-side issues and enable nearby businesses which are still viable – such as gyms, theatres, cinemas, shops, hair salons, barbers, restaurants and cafes – to flourish when it’s safe to do so.

Again, this is a trend that pre-dates the pandemic, but one which has been driven forward to a greater degree by the unintended consequences of the Covid-19 crisis.

With the troubles of the high street in mind, the Government has been trying to make it easier for individuals and developers to transform commercial units into new homes.
Here, we take a closer look at the latest state of play.

A quicker conversion process

On 31st March 2021, new rules enabling commercial premises to be converted into residential homes came into force. This was part of a package of measures to revitalise England’s ‘cherished high streets and town centres’.

Housing Secretary Robert Jenrick said the new rules will help support the creation of ‘much-needed homes’ while also giving high streets a new lease of life. It will achieve this, he said, by removing eyesores, making the most of brownfield land and transforming unused buildings.

The government says allowing unused commercial buildings to be converted into homes will encourage more people to live near local high streets and come to the area for work and leisure, helping cement high streets and town centres ‘in their rightful place at the heart of communities’.

Instead of a full planning application, as before, the new homes would be delivered through a simpler ‘prior approval’ process. The government insists they will still be subject to high standards, to ensure they offer adequate natural light and meet strict space regulations.

The changes haven’t come into play with immediate effect, with the Government now introducing legislation for England to bring forward this right from 1st August 2021.

“We are creating the most small business-friendly planning system in the world to provide the flexibility needed for high streets to bounce back from the pandemic,” Jenrick said when announcing the plans. “By diversifying our town and city centres and encouraging the conversion of unused shops into cafes, restaurants or even new homes, we can help the high street to adapt and thrive for the future.”

Developers and individuals were able to convert commercial premises into residential homes before, but the new rules are designed to speed this process up and make it less burdened with red tape.

Not every unused commercial building will be eligible. The Government says that the building changing use must have been vacant for three months before the date an application is lodged. This is to protect successful businesses in these premises.

What’s more, the Government says ‘a size limit will also be included of 1,500 square metres of floorspace being able to change use under the right to focus the right on medium sized high street sites which are more likely to be suitable for conversion’.

You can find out more here.

Changes to permitted development rights

The above rules follow on from various changes made last year to permitted development rights (or PDRs).

In August 2020, for example, a new permitted development right was introduced to allow the demolition of purpose-built detached blocks of flats, offices and light industrial premises, and replace them with purpose-built detached buildings for use as flats or a single dwelling house.

There were also additional rights provided for the construction of new dwellings on top of purpose-built detached blocks of flats and certain other buildings, to enable developers and individuals to build upwards on existing infrastructure. These rights are subject to certain conditions as well as a prior approval process.

From 1st September 2020, a new broad ‘commercial, business and service’, Use Class E, was created. This combined disparate uses such as retail, restaurants, cafes, offices, gyms and health centres into one broad category. Changes within this class, with certain exceptions, will now not require planning permission.

“The legislation has at its heart a more general desire from the government to provide flexibility for businesses to adapt, diversify and respond quickly to the changing demands of communities,” James Cook, head of planning at Blacks Solicitors, said. “The government has recently consulted upon further changes to support housing delivery including a new permitted development right to allow the change of use from a use or mix of uses within the new Class E to residential use, subject to conditions and prior approvals,”

“The Government described this as going ‘significantly beyond existing rights, allowing for restaurants, indoor sports, and creches, etc. to benefit from the change of use to residential under permitted development rights for the first time’.” Cook added.

There are, however, concerns from some that, while the opportunity to build more homes is welcome, there won’t be enough of an obligation to make these affordable.

Josie Parsons, chief executive at Local Space, commented: “As a charity mainly providing temporary accommodation for local authorities and key worker housing within London, we naturally welcome any measures aimed at increasing supply to tackle the UK’s housing crisis. However, we have strong reservations around the latest announcement by Government in relation to permitted development rights and the unintended impact that it may have upon the delivery of much needed affordable housing, especially for key workers,”

“We are concerned at the lack of any mechanism to ensure that affordable housing is included within developments brought forward under PDR, and in relation to the quality of some recent housing schemes delivered under it. Whilst we are certainly supportive of rejuvenating our high streets, this must not be at the expense of providing homes for our critical key workers and some of the most vulnerable in society.”

Nick Whitten, head of UK living research at JLL, said Covid-19 has transformed the way we work and play, having a profound impact on the types of buildings we need on our high streets.

“Allowing the conversion of obsolete commercial buildings makes sense to deliver much-needed homes, as long as the checks and balances are in place to ensure those homes are fit for a modern 21st century standard of living,” he told the Evening Standard.

Jonathan Seal, chief executive of developer Regal London, also welcomed the announcement, arguing that there are no simple answers to revitalising town centres. “Instead, a carefully coordinated set of strategies are required to make these places where people want to be, that are relevant to everyday life and are just not about retailing,” he explained. “Diversifying uses to include new homes is a hugely important part of any town centre regeneration.”

While there will be justifiable concerns about affordability, quality of build and the chance for rogue operators to slip through the net more easily with less red tape, there is a huge desire and need for a change to the high streets post-Covid. Making it easier to convert unused buildings into purposeful ones seems to many like a good thing, as long as strong checks and balances remain in place.
 
 

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