Housing is a key issue in the upcoming general election, and the main parties have all put forward their goals for building new homes in their manifestos. But few have gone into granular detail about how they will achieve this. Robert Haigh (pictured, right) and Scott O’Dell (pictured, left), of leading property consultancy Fisher German’s valuations and planning departments respectively, have called on the next government to keep a crucial bit of recent legislation – Class MA permitted development rights – to help deliver new homes to the market quickly.
The housing crisis is front and centre in many people’s lives – new homes are not getting built and the parties vying for votes know it’s a problem they need to solve.
That is why new homes are centre stage in every election manifesto.
Flicking through the main parties’ manifesto documents made us think that our political parties are participating in some form of Olympic sport in trying to outdo each other with housebuilding targets.
It seems ironic that although the incumbent Conservative government never met its target of building 300,000 new homes a year whilst in office, in their manifesto they have pledged to build 1.6m new homes over the life of the next parliament which is equivalent to 320,000 new homes a year.
Next out of the blocks with their stated target of 1.5m, or 300,000 new homes a year, was Labour. A few days later, not wanting to be out ambitioned by their two major rivals, came the Lib Dems with their pledge to build 380,000 new homes a year, of which 150,000 would be designated social housing.
Clearly, housing is one of the top five election issues given the fact that, according to Housing.org, 8.5m people in England are currently facing some form of unmet housing need.
In addition, every party has listed incentives for first-time buyers, to address the fact that the national average age for first-time buyers is now 34 (38 in London) as well as bold statements about planning reform. The latter range from fast-tracking planning for brownfield sites (CON) to prioritising social rental housing (LAB), to expanding Neighbourhood Planning (LIB).
Whilst it will be a drop in the ocean for achieving manifesto housing targets, permitted development flexibilities introduced in March 2024 could provide a relatively quick boost to the delivery of new housing and attract private sector investors.
Class MA permitted development rights (PDR) allow commercial business premises (Use Class E e.g. retail, offices and more) to be converted into residential properties subject to the ‘Prior Approval’ process.
The matters for prior approval consider the suitability and impact of the proposed development although approval should only be withheld where there is a compelling reason for this. Before the March change, Class E buildings had to be vacant for three months prior to the submission of an application, and the maximum space for conversion was limited to 1,500 sq. m.
The removal of these restrictions should result in additional homes coming to market more quickly.
In brief, MA can help deliver homes quickly, offer property investors and developers the opportunity to improve or alter their properties, enhance the value of their assets and improve the longer-term ROIs in locations where this was not previously possible.
To be effective and make a real difference, we need unadulterated decision-making, free of the influences of local politics and bias towards overly restrictive policies.
Streamlined decision-making is often at risk as MA sometimes supports development not usually welcomed by Local Planning Authorities because of the perceived loss of employment floorspace.
Flats created from office accommodation tend to attract investors looking to maximise returns at minimal risk. This is why there is a significant market based around groups such as Housing Associations taking a lease over a whole building at only a slight discount from the standard rate and then leasing these flats on a nightly rate to local authorities.
The net yield achieved can be significantly greater than traditional leasing methods because of reduced management costs and no risk of rolling voids. Exact returns depend on the area but can be up to four per cent more.
Converting empty offices to residential accommodation also allows investors and owners to reduce the risks associated with owning assets in a market which is facing enduring structural changes – such as those associated with ever-evolving post-Covid work practices.
The impact e-commerce has had on high street retail is widely documented, as has its impact on the value of retail asset stock. In addition, the subsequent consequences of the drop in footfall in commercial districts and its effect on the demand on traditional high street service providers, such as sandwich makers, pubs and retail outlets, are visible to all.
Therefore, whilst MA affords responsible property investors and developers huge opportunities, with this come obligations: in particular related to their ESG commitments and delivering a product suitable for the target market.
It is worth remembering that we are all under pressure to improve the sustainability of buildings: this can often be inherent in the reuse of buildings, a hidden benefit of MA. Given the UK’s commitment to meeting net zero carbon goals by 2050 and further manifesto pledges, the process of converting vacant and obsolete business spaces into energy-efficient new homes may also help.
The conversion of obsolete/empty offices into homes will present challenges but, with the right people involved, there will be opportunities to deliver homes in a housing crisis, ensure quality and environmental benefits are maximised, whilst supporting a profitable and socially responsible ROI.
Hopefully, Class MA will continue to exist after the election as it can help to deliver the homes, we, as a nation, desperately need.
