How to Convert Offices into Homes Under Permitted Development Rights
With a global shift to flexible working and many businesses choosing remote working for their team, it’s no wonder that many property owners and developers are looking into alternative methods of income for their commercial spaces.
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In the UK, permitted development rights mean that many office buildings can be converted into residential spaces without the need for planning permission. Along with reducing the number of unused spaces in our towns and cities, this will create more affordable housing and help to negate the housing shortage currently facing part parts of the UK.
Landlords and property developers are becoming increasingly aware of the potential of disused commercial spaces and permitted development does support the conversion of these spaces, within certain limitations that we'll talk about in this article.
So, how do you know if your project is covered under permitted development? And, if it is, how do you go about funding this conversion? Keep reading to learn all that and more.
Permitted development rights cover the building work you can carry out without planning permission, such as conversions, extensions and even Change of Use, in some circumstances. In 2020, the government made significant changes to the permitted development rights, making it even easier for landlords and developers to make improvements to properties without the red tape of planning consent.
However, as we'll discuss shortly, the 'golden days' of buying large-scale office blocks to convert to high-income blocks of flats may be over thanks to a recent change to space requirements under permitted development rights.
Permitted development changes
Firstly, in 2020, we saw the introduction of two new classes: Class F1 (for learning and non-residential institutions) and Class E (for commercial, business and service). This simplification of use classes supports developers by adding rules that govern those classes and allow for the creation of more liveable accommodation in the wake of COVID-19 office vacancy rates.
In 2021, the government introduced rulings allowing class E buildings to be converted to C3 residential buildings under a class MA, along with a size limitation (previously, there was no stipulated maximum size of the building conversion). This new maximum 1,500 square metres of floorspace limit aims to protect the loss of large-scale office blocks.
In the same legislation, the new permitted development rights allow for larger extensions to existing buildings, which is particularly useful for developers investing in schools, colleges and healthcare facilities.
To learn more about permitted development rights, the classes and how they have changed in recent years, check out our Guide to Permitted Development Rights.
How Class MA may impact your conversion
In the case of converting an office space into a residential property, you have to be aware of how rulings around use classes and Class MA affect you. At first, it may seem that the new size limitations of a maximum of 1,500sqm for conversions make it harder for developers to convert a large office block into a residential space.
However, Class MA did expand the rights of permitted development to the whole of Class E use buildings, so you can convert shops, restaurants, cafes as well as offices (within limitations) into residential uses. So, while you will have to meet a number of requirements to be able to convert a Class E building into a Class E under permitted development, it’s still very possible to transform an office building into affordable housing in well sought-after parts of town.
Further to this, developers can also explore the conversion of mixed property portfolios under permitted development - for example, if you owned a unit or series of units that had office space and restaurant/cafe space within it, you could likely convert them under permitted development rights.
Class E permitted development considerations
Before breaking ground on your conversion, permitted development rights state that you must consider the following.
- A commercial building must be vacant for a minimum of three months before it can qualify for permitted development
- The building must have fallen under Class E for a minimum of two years
- While planning permission is not required, the local planning authority must consider a number of safety measures including flood risk, contamination risks and other factors. This also includes any potential disruption to the local community, and how it will impact existing residents - a vital consideration for built-up areas like high street development.
- As we’ve already mentioned, the property must be no larger than 1500 square metres of cumulative space.
- Tenant and landlord consent may be required if the land is subject to an agricultural tenancy.
So, it’s worth taking the time to determine whether your project meets all of these criteria before investing in the project. Thankfully, the clear direction from the UK government means it should be quite easy to determine the efficacy of your development.
The changes to permitted development rights we’ve discussed will allow developers to convert office spaces left unused in the wake of the pandemic into homes, generating a consistent income from spaces from properties that are currently not earning anything for landlords.
Article 4 directions as a barrier to the conversion of offices
In some parts of the country, local authorities have issued Article 4 Directions - which effectively remove permitted development rights from certain areas. This typically happens in areas of key interest to a local authority such as town centres, tech hubs and employment centres.
If an Article 4 Direction is in place in the area you're looking at, you'll need to apply for planning permission in the traditional format. You should check with the local council in the area for any Article 4 Directions in place as they will impact your ability to carry out your project.
As well as meeting the permitted development rights criteria, your conversion should conform to the Nationally Described Space Standards (NDSS).
While this is an optional requirement, it is designed to guide developers into creating liveable spaces, taking into account space for storage, food preparation, bathrooms and sleeping.
Along with NDSS, you should also get acquainted with the Housing Health and Safety Rating System (HHSRS), which dictates that a living space should meet certain health and safety standards, and be free from hazards such as mould, excess temperatures, asbestos and lead.
As a developer, profitability will be high on your agenda, but you must make sure that you consider all of the above when determining the number of residential units in your conversion. In fact, the Homes (Fitness for Human Habitation) Act 2018 establishes the ‘crowding and space’ standards, which you will need to consider when planning your office block to residential conversion project.
Even if your development falls under permitted development rights and meets all of the above criteria, you may need to submit a prior approval application to gain final approval on office conversions. For the most accurate and up-to-date information about prior approval, and to find out whether you need it, check out the government’s General Permitted Development Order Regulations.
The document outline These documents will outline what types of development are subject to prior approval and what documents you’ll need to submit. Prior approval is a faster process than standard planning applications.
Permitted development finance
The government’s ‘Build Back Better High Streets’ campaign encourages landlords to take advantage of permitted development rights that will see vacant offices transformed into profitable living spaces across the country. So, if you own a property that falls under the permitted development rights and you are keen to start generating income from that space, now is a perfect time.
To get started with your commercial to residential conversion, you may need finance that applies to your project. At Rangewell, we cover the whole of the market, including a number of specialist lenders, so you can find the finance that you need to turn your project into a reality.
To get started, contact our team of experts and we’ll discuss your plans to convert office buildings into residential spaces, and what kind of finance you need. From your circumstances to budgets and projected earnings, we’ll take everything into account and source the best finance to suit your needs.