On 3 December 2020, MHCLG published a consultation proposing “measures to support housing delivery, economic recovery, and public service infrastructure”. The proposals have potentially very significant impacts. The government has demonstrated that it is prepared to move quickly following such consultations, frequently adopting measures consulted upon with little further consultation or notice. It is therefore not impossible that, whether or not some of the proposals put forward in this consultation have been raised and discarded before, or are likely to receive heavy opposition, they could be progressed nonetheless. The consultation closes on 28 January 2021. All who have an interest in property and maintaining the vitality of town centres and local communities should consider responding.

What is being proposed?

The consultation covers:

• a proposed new permitted development (PD) right for change of use from the new Use Class E (commercial, business and service use) to residential;
• expanded PD rights and a new planning application process for hospitals, schools and prisons; and
• proposals to simplify and consolidate existing PD rights. These include a proposal seeking views on changing the breadth of the new Use Class E.

These changes are intended to take effect pending fundamental reform of the planning system pursuant to the Planning for the Future White Paper consultation proposals. The proposals relate to England only.

The new residential PD right

The government proposes to introduce a new PD right for change of use from the new wide Use Class E (which was introduced last summer) to residential use. This would mean that express planning permission will not be required for this change of use, putting into effect the government’s wish that a wider range of commercial buildings should be allowed to change to residential use without the need for a planning application. The intention is that the new right will come into effect from 1 August 2021. It would replace current PD rights for change of use from office to residential (Part 3, Class O of Schedule 2 to the GPDO), and from retail etc to residential (Part 3, Class M of the GPDO), which will remain in force until 31 July 2021.

The new right will be available to a large percentage of properties in commercial, business and service use whether in town centres or otherwise, so long as they were in Class E use as at 1 September 2020, even properties in conservation areas. There will be no size limit on either the size of building that can be converted, nor the percentage of Class E properties in an area that can be lost. Prior approval will be required from the LPA, but on limited grounds.

Proposed changes to Use Class E

The consultation asks whether uses that are currently able to change use within the new Class E should be able to change to any use within that class, or whether this right should be restricted. The consultation also asks whether the scope of some rights should be broadened, for example to allow for change of use to or from Use Class E rather than to/from individual uses within it as currently.

It is interesting that the government is seeking views on whether the new Class E should be limited because, when it originally consulted on changes to retail uses in October 2018, the proposal then was simply to amend Class A rather than the wider changes that were ultimately introduced last summer.

Potential impact

The proposed new residential PD right would clearly have a major impact at any time – the effect of losing potentially large quantities of commercial, business and service properties to residential use in a town centre environment would always be significant.

However, to propose such a new right now seems premature, with so many retailers struggling and landlords wondering when they will see their rents paid, and when there has been so little time to see whether the flexibility offered by the new Use Class E will indeed have a positive impact on town centres. Any negative impact will be exacerbated if the government decides to go ahead with widening Use Class E – if the new residential PD right proposed by this consultation is progressed, widening Use Class E would in turn widen further the potential for more premises to be converted from commercial to residential use, often irreversibly due to the length of residential tenures, with limited oversight by LPAs.

This could be further exacerbated if the Treasury proceeds (as reported by the Times on 26 November 2020) with a ban on local authorities buying investment property. The Treasury is proposing this because reduced rental income has impacted the value of commercial portfolios acquired by local authorities with low-cost government loans, which has made many authorities vulnerable during the Covid-19 pandemic (with authorities like Croydon pushed to insolvency). Such local authorities may be keen to take advantage of an easy way to reconfigure their failing commercial town centre portfolios and recoup their losses by implementing the new residential PD right.

Finally, solving problem town centre vacancies by converting them to residential use conflicts with the findings of the Open Doors pilot, which in 2018 linked community groups needing space with landlords struggling to fill town centre retail units. MHCLG's recently published Evaluation Report of the pilot demonstrates how valuable town centre space is for community use, with the scheme deemed a success by landlords and community groups alike, and outlines government support for establishing new Open Doors networks across town centres. Recommendations for the future development of town centre community meanwhile uses as set out in the Evaluation Report do not sit happily alongside these proposals for a new residential PD right in favour of the same town centre premises.

What next?

The government is trying to juggle twin priorities of saving the high street and solving the housing crisis. The question is whether either purpose can be served by these proposals which, if progressed, could in fact cause damage to communities that could take decades to recover from. Introducing new cultural, community or educational uses into town centres would surely restore the fortunes of our high streets more effectively than ill-suited residential conversions. It would also be a much better response to the resurgence in local community facilities that has been one of the few positive outcomes of the Covid-19 pandemic. But the ability to change use to residential through this proposed PD right will inevitably crowd out such opportunities.

Developers, owners and investors have until 28 January to make their views on the proposals known, whether directly, by responding to the consultation through the online survey (here), or through their industry representatives. We have prepared a Client Briefing to help clients to understand the issues and impacts arising from these proposals – please contact us if you would like to receive a copy.

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