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Planning reform is often discussed in terms of what it means for housing, but it affects commercial property too. In fact, some of the biggest planning reforms in years have recently targeted commercial property, and will make it much easier to switch in and out of different commercial uses. Centre for Cities has recently responded to a recent Government consultation proposing to make it easier to convert commercial buildings into new homes – here’s what it means for cities:
In the middle of last year, the Government announced that the old system for regulating how commercial property can be used – the use classes – was to be greatly simplified. Rather than having separate classes for offices, banks, restaurants, and shops among others, many of these city centre uses have been merged into single “E” commercial use class.
That means if you owned, say, a building which was currently used for offices, previously you would have needed planning permission from the local authority to convert it into a restaurant, which they may not have granted. Converting a shop into an office required a step called prior approval and was subject to size restrictions. Nowadays though, those are all the same use class. Occupiers and landlords can switch between most commercial uses as they please, and even mix and match different kinds of businesses and offers to customers within the same space.
This is a big boost for city centres, especially those outside the Greater South East. While in recent years there has been a discourse around “the death of the high street”, Centre for Cities research shows that the problem is that many cities have too much retail space. Our commercial property data tool shows that, for example in Preston, 38 per cent of commercial floorspace in the city centre is shops, even though in the average city centre this is only 25 per cent.
Accordingly, retail vacancy rates are well over 10 per cent in many cities, but the planning system has not been successfully stewarding these properties and letting firms repurpose this valuable urban land for new uses. The planning permission route was too slow and uncertain, as too many decisions were handed out case-by-case for each individual property rather than allowing city centres as a whole to respond to change.
But more reforms are going even further than that. Centre for Cities recently responded to a government consultation to support the proposal that converting “E” commercial class properties to residential uses should be considered “permitted development” and thereby no longer need planning permission, outside of special protected areas such as national parks. This will make it easier to turn vacant shops, restaurants, and other unused land into new homes, addressing the housing shortage and reducing the waste of valuable urban land.
We would expect this to be concentrated in cities in the Greater South East, with the most expensive housing and greatest need for new homes. For example, Figure 1, from our report Making Room, shows that while 18 per cent of new homes in Brighton and 30 per cent in Basildon were similar permitted development from office to residential from 2015-18, less than 1 per cent were in Blackburn and Middlesbrough which have lower demand for new homes.
Figure 1: Permitted development allows new homes in the most expensive cities
Source: Ministry of Housing, Communities & Local Government, 2019
There have been some concerns that the quality of some of these conversions was poor. Yet to the extent this is true, it is best addressed through future reforms to flexibility that make it easier to redevelop land. The reason these poor quality buildings exist at all is because demolishing them is too difficult and uncertain under the current, case-by-case discretionary planning permission process.
There is the possibility though that making it easier to convert commercial property into homes could put pressure on city centre economies. The reforms only increase flexibility in one direction, as converting homes into commercial property still requires planning permission.
Competition for space between office and residential has since became a problem in some places, with cities such as Southend and Slough losing 8 and 9 per cent of their office stock respectively from 2014-17 due to the permitted development conversions that do not need planning permission. If in the near future lots of city centre commercial space in particular is lost, which is likely to impact the future performance of the local economy, cities may need to apply for what are known as Article 4 directions to exempt city centres.
However, this can be avoided and the very best results for housing affordability and cities can be achieved if the Government pairs this new flexibility with the housing proposals set out in the separate Planning White Paper. Increasing the supply of land for development on the outskirts of cities through “Growth” areas and making redevelopment of “Renewal”, and Centre for Cities has set out how this should be done.
Not only would this increase the supply of housing and reduce pressure on commercial space, but it would also make it easier to demolish poor quality structures and replace them with nice new buildings. Ideally, planning reform should aim to arrive at a state where the entire system is more flexible and the system’s rationing of development through case-by-case planning permissions is ended in most urban areas, such that eventually residential properties can be easily converted back to commercial without any concerns for housing affordability. This would not just ensure housing is cheaper, but would also create jobs, grow the local and national economies, and ensure urban land is used efficiently.
Planning reform has sometimes been dismissed by commentators as something which is too difficult, too complex, and too controversial. Debates around this will no doubt continue into 2021, especially as the response to the Planning White Paper is released and the legislative process begins.
Yet it is important to remember planning reform is already happening. Commercial property may not attract the same political interest as the housing crisis, but right now it is undergoing the most radical changes in decades. Making the most of these changes will require reform across all of our built environment, resulting in less rationing of new homes, restaurants and offices, and more affordable and prosperous cities.
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