Communal living – flexible renting within a rigid planning system

Co-living is perhaps a concept traditionally associated with the shoestring lifestyle of students. But what about curated workspaces, well-equipped gyms or perhaps even a trip to the spa - all under the same roof?  New flexible living models have already started to spawn across London.  In this post, we look at how law and policy are playing catch up as these new products challenge traditional methods of defining land use.

The capital's leading developers are taking notice of co-living. There is an unwavering desire amongst the world's transient young population to work in London. However, traditional home ownership aspirations have been replaced by a realism around the cost of buying property in London. The market for new rental products, focussing on access to luxury facilities and large social networks, carries an obvious attraction.

So what happens when co-living models don't fit within an existing land use category - where a property may be occupied by different types of users, some for only one night and others for perhaps several years? How should these applications be treated by the planning authority, particularly where they address an identified need?

The Use Classes Order (UCO) was enacted in 1987. It has been amended since then but still fails to offer a category of land use that reflects the key characteristics of co-living developments. The approach to classifying land use in the UCO is now firmly entrenched in local planning policy and therefore has a direct impact on how planning decisions are made because there is a requirement to "fit" within these classifications when deciding whether a proposal is policy compliant.

Even where the developer secures the support of the planning authority in principle, policy requirements can still make or break project viability. For example, the requirement to provide affordable housing has a direct relationship with land use, whilst CIL payments can be very different depending on the use class that proposals are categorised within.

The reality is that the use class system is in desperate need of reform. A more flexible approach is essential in order that co-living developments are not pigeon-holed into the ill-fitting categories applied to traditional residential development. Greater weight must be afforded to the benefits of such projects within locations identified for employment-led use. In that sense, the co-living concept has much more in common with the average London hotel - a protected use in many parts of the capital that is not subject to affordable housing contributions and where greater flexibility is afforded in terms of space standards.

Often the tendency is to fall back on the model of purpose-built student accommodation, usually classed as a sui generis use, when assessing the acceptability of the development and the mitigation that it requires. However, a growing focus on luxury accommodation, targeted at young professionals, necessitates a different approach. Unlike traditional student accommodation, flexible living developments can play a key role in housing the local workforce and delivering new workspace (thus easing pressure on London's congested residential and office markets).

Certainty is key, in terms of how to present these flexible living products to the planning authority and in explaining to investors what the costs of securing planning permission will be. These issues extend beyond the life cycle of the consenting process. Developers need to be confident that the planning permission reflects the operational reality of the development.

That may involve building flexibility into the permission in terms of who can occupy the new units (students, young professionals or perhaps even hotel guests). It may also involve relaxing restrictions in London on how long the occupier can stay where the use is classified as residential. Under section 25 of the Greater London Council (General Powers) Act 1973 (the "1973 Act") , the use of any residential premises as "temporary sleeping accommodation" is deemed to be a material change of use. Sleeping accommodation is considered "temporary" where it is occupied by the same person for less than 90 consecutive nights and where it is provided (with or without services) either for payment or by reason of the employment of the occupant. Although a succession of tenancies of 90 days or more would be permitted within the C3 use, the 1973 Act means that any use of the units for shorter term lets, occurring on more than 90 days in any year, would require a further planning permission.

Planning authorities also need to understand better the economics of the co-living model. In many cases, this will not be dissimilar to private rented schemes where we have already seen greater traction in planning policy.

The Mayor of London's SPG on affordable housing and viability confirms that purpose-built shared accommodation 'can play a role' in meeting housing need where it is of high quality and well designed. Location is also key, with some local planning authorities expressing support for co-living products that address existing constraints within the Borough. These are encouraging first steps. However, fundamental changes to the consenting framework will be required if the supply is to meet the demand for innovative solutions to London's housing crisis.

Author: James Gibson, Associate (Scotland), Planning, Real Estate, London

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