Just as the end of the temporary three year window which allowed the change of use of offices to residential, as permitted development, was starting to draw to a close, the Government finally made up its mind and confirmed that the changes would be made permanent – and provisions will be introduced to extend the commencement time limit for approvals already given. Indeed, not only are the changes to be made permanent, but the provisions are intended to be widened.
Now is perhaps a good time to reflect on what the effect of the temporary provisions has been.
To recap on the changes, they were first brought in on 29 May 2013 and the temporary legislation comes to an end on 30 May 2016. Applications have to be made to the local planning authority for ‘prior approval’ to convert premises that were in office use (within the B1(a) (as opposed to A2) category) on 30 May 2013 into residences.
These rights do not apply to certain predetermined geographical areas (primarily the City of London and nearby nationally important office areas), safety hazard zones and explosive storage areas nor to ancient monuments and listed buildings. Under the prior approval process, authorities have 56 days to decide whether their prior approval is needed to the proposal on the grounds of contamination, flooding or traffic impact. Conditions may be imposed in relation to the three areas for which prior approval can be required.
Some authorities reacted to the original proposals either by challenging the Government’s refusal to exclude their areas from the provisions or by seeking to remove the rights through mechanisms known as Article 4 directions. The legal challenges failed. Islington Council was a Council which led the use of Article 4 Directions, publishing a direction seeking an exemption for its whole area.
However, ministers have reserve powers to intervene and reject such orders if they wish. The Council was told by ministers that it had “applied its directions disproportionately” so it revised its Article 4 direction to a reduced area but the government determined, in light of the tests set out in national policy and guidance, that the direction remained unacceptably expansive and unjustified and cancelled it completely. This is not to say that article 4 directions are a perfect means of control; they have been criticised as being cumbersome and they also carry compensation obligations if planning permission is refused within 12 months of the original direction.
Other authorities responded by refusing prior approval applications as if they were planning applications. Proposals for Utopia Village in Camden were rejected by the Council on 15 grounds, many of which related to the failure to provide matters which would have been sought under a section 106 agreement. On appeal the Council’s decision was comprehensively overturned.
Indeed one of the biggest benefits of these permitted development rights to the developer is that they bypass the need for most section 106 contributions, including affordable housing requirements. Such agreements can be justified only if they relate to contamination, flooding or traffic impact.
In terms of the response of developers to the proposals, the impact has been very patchy. In London at least 16,600 new dwellings are estimated to have been created, but these are concentrated in a few of the London suburbs and the better residential areas. Additionally many residential developers prefer working on a ‘knock-down and start again’ development model for tired office buildings and these sorts of refurbishment opportunities are outside their comfort zone.
The most interesting element of these changes is that there are to be new rights to allow for the demolition of offices to rebuild for residential use.
In terms of office stock the impact has mainly been in London – over 800,000 square metres of office floorspace has been lost. In some areas commercial office developers see the office to residential exodus as a great opportunity. In some locations such as Ealing in West London the existing office stock has all but dried up as a result of the changes, office rents are rising and new build schemes are again becoming viable.
There was some confusion about the May 2016 cut-off date. Some developers and agents thought that this was a date when any physical works needed to have started, but because the consent is for a change of use, it was the new use (i.e. residential occupation) that needed to be begun before the cut-off date. In some cases many developers were embarking on projects which would never have be completed (and occupied) before the cut- off date.
With the changes being made permanent many uncertainties will now be resolved. Although the legislation is yet to be published, we expect the see the following:
- these permitted development rights will now be made permanent.
- those who already have prior approval will have three years in which to complete the change of use rather than having to do so by May 2016
- the rights will in future allow the demolition of office buildings and new building for residential use.
- new permitted development rights will now enable the change of use of light industrial buildings and launderettes to homes.
Those areas that are currently exempt from the office to residential permitted development rights will have their exemption ended and they will be given until May 2019 to make (and justify) an Article 4 direction if they wish to continue determining planning applications for such change of use.
Finally – and perhaps of most interest – there are to be new rights to allow for the demolition of offices and to then re-build them for residential use. Potentially this will entice many new players into the market.