00Executive Summary

Competition for space is becoming more acute as the economy clusters ever more in cities, particularly in city centres. Previous work by Centre for Cities has shown that high-skilled, knowledge-based jobs are increasingly located in successful city centres because of the benefits on offer compared with other parts of the country.¹ This has sparked a revival in city centre living, as the most vibrant city centres once more offer the lifestyle that residents — specifically young professionals — are looking for.

The revival of city centre living means a growing number of cities face the challenge of balancing the needs for both commercial and residential property. City centres do not have unlimited supplies of land so accommodating continually growing numbers of residents and businesses requires difficult policy choices about which types of property to prioritise. Cities must ensure the commercial heart of the city is not squeezed by housing development if they are to continue to provide jobs for people who live in and around them.

This has long been a challenge in central London, which has taken the decision to prioritise commercial over residential property, in light of constraints on space. It has been much less of an issue in the centres of other large cities, such as Manchester and Birmingham. This is despite strong increases in demand for residential and commercial space in recent years, because of the large amounts of land they have had available for development. But the resurgence of these cities means how land is used is an increasingly urgent question.

Currently, planning policy compounds this threat to commercial space. The sustained prioritisation of brownfield land, combined with opposition to city expansion, means development has not kept up with growth, intensifying competition for space. Rather than directly addressing this shortage of land, the recent introduction of permitted development rghts (PDR) squeezes commercial space further where residential demand is high, by allowing the conversion of commercial buildings into residential usage without the need for
planning permission.

The policy has no doubt helped to deliver new homes. Nearly half of new homes in Crawley and 34 per cent in Slough are due to PDR, but this has come at the cost of commercial space and so threatens the contribution that cities like these make to the national economy. It is right for policy to aim to provide more housing in cities where demand is highest, but these homes should be additional to commercial space, not instead of it.

To ensure cities are able to provide the commercial space they need for economic success and to sustain their roles as places of residence, the following policy changes should be made:

1. Prioritise commercial space in city centres. Building on the exemptions that the Government has already given to selected city centres, all city centres should be offered exemptions from commercial to residential conversions under PDR. While the policy plays an important role in converting disused business space into new homes in suburban locations, it restricts the ability of city centres to provide sufficient commercial space crucial for their future economic growth. Though residential use may generate a greater return than office use for a specific building, conversion is not always the best use of space for the city economy as a whole. To ensure city centres are able to play their role as places of production, the exemptions which already apply in some areas, such as central London, should be extended to cover all city centres.
2. Relax planning constraints that limit the development of new homes. The green belt restricts the ability of cities to expand outwards, while conservation areas — and protected views in London — constrain their ability to build upwards. These regulations need to be relaxed if our most successful cities are to provide the homes they need without squeezing out space needed for commercial property.
3. Devolve missing policy powers to big cities. Each part of a city region has a distinct economic role to play. Some are better placed to provide housing while others better suit commercial space. Most city regions with a mayor have formal powers to plan across their areas. But the mayors of the West Midlands and Tees Valley do not. Two things should happen – firstly, the Government should give these mayors the same powers as their colleagues elsewhere. Secondly, other big cities should be given a devolution deal at an appropriate geography so that they can better manage the supply of residential and commercial space.