The new Class MA PD right – impact on landowners and developers

On 21 April, a new permitted development (PD) right came into force enabling the owners of most town centre premises to change from Use Class E (commercial, business and service) to residential use, with only limited consent required from the local planning authority. The new PD right, Class MA, will be exercisable from 1 August 2021. We have written before about the government’s proposals to solve both the problems facing high streets and the housing crisis by introducing housing into town centres by means of a PD right for change of use from the new Use Class E to residential use (see here and here). The impact of such a right could be magnified if proposed changes to national policy curtailing the use of Article 4 Directions go ahead. Concerns have been widely expressed about the potential impact of the new PD right on town centres and high streets. What could the impact on landowners and developers be?

Potential impact on town centres

There has been widespread concern regarding the potential impact of the exercise of the new PD right on the vitality and viability of town centres and high streets, with warnings about irreversible damage that unregulated development could cause and no certainty that residential units will be sustainable or contribute usefully to housing need in the area. Any such impact will affect town centre property values. Any buildings within the wide Use Class E can exercise the right, with no limitations on the number of buildings that can exercise the new right in any one area, nor on the location of buildings that can exercise the new right – the right is not limited to long term vacant commercial units on failing high streets. Apart from in conservation areas, the impact of the change of use of one or more buildings in any area on other users in the area, or on the area as a whole, cannot be taken into consideration by the LPA when determining an application for prior approval. Such an impact could be significant, particularly given the potential for poor quality conversions, because Class MA does not of itself permit physical works to the exterior of the building.

Effects could be magnified once temporary Covid-19 protections for businesses expire (see our blog post of 21 April here). Because no evidence is required that commercial use is no longer viable, multiple landlords may decide that converting empty retail or office premises using the new Class MA PD right offers a quicker way to generate an income stream than other alternatives. Despite the findings of last year’s Open Doors Pilot, widespread exercise of the new right would remove the opportunity for communities to try alternative uses for town centre premises. The role that many town centres currently play as community hubs may change irrevocably, along with patterns of footfall.

Potential impact on developers and landowners

How specific property portfolios are affected will depend on the nature and location of the portfolio, and the extent to which, and the speed with which, the right is taken up in an area.

The new right will provide opportunities: for example, for targeted regeneration by converting selected vacant commercial units, which could boost remaining existing commercial, business or service uses in a portfolio, particularly if advantage is taken of the flexibility offered by Use Class E to try out different business models. The 1,500 sq m floorspace limit could provide up to 40 studio apartments (subject to natural light requirements) – a significant contribution to new resident numbers and footfall in an area. No affordable housing will be required, offering a significant advantage compared to new build housing for which a planning application is needed. Owners interested in taking advantage of the new right should check planning conditions and obligations relating to the property to ensure that there are no restrictions which might prevent the change of use. Tenants will also need to check the terms of their lease, particularly permitted user and development clauses. Express planning permission will be required for any works to the exterior of a property.

However, the difficulty for all property owners, particularly those who are not intending to implement the right themselves, is knowing how many other buildings may be converted from commercial to residential use in an area, and how quickly:

• The number of commercial units lost and dwellinghouses created, and the type of residents who move in, will affect footfall, and in turn development and management decisions.
• The physical appearance of converted properties may negatively impact the attractiveness of an area and its capacity to draw non-residents.
• In some areas it may be easy to anticipate which properties might convert to residential use under the new right, and the types of new dwellings that might be created, but in other areas trends may take time to emerge. It may be hard to anticipate if and when, owing to the number of residential conversions in an area, previously viable commercial uses cease to be so. Also, changes to footfall may impact not only the area itself but also further afield.
• Finally, where buildings providing Use Class E services, such as health centres, are converted to residential use yet the need for the service is still there or even increases as a result of this conversion and other town centre residential developments, this could impact the contributions that LPAs seek through planning obligations towards replacement facilities.

Owners can control the use of the right by their own tenants through covenants in leases, specifically by limiting permitted use and prohibitions on change of use or development. However, understanding the potential impact on an area of the use of the new Class MA PD right by other owners and occupiers will require close monitoring of the take up of the right and the types of residents occupying the new units, both in areas where investments are located and in surrounding areas. Owners and developers may also consider undertaking an assessment of centres to help them forecast the potential scale and speed of take-up, potentially in conjunction with local planning authorities or local business organisations. Assessments may need to be done regularly or on an ongoing basis, bearing in mind how quickly a vacant unit can be converted to residential use.

Won’t LPAs manage the exercise of the Class MA PD right, to limit potential damage to town centres?

Whereas LPAs can currently control the widespread exercise of PD rights for commercial to residential change of use through both the use of Article 4 Directions and planning conditions and obligations, this power is likely to be limited in the future - the government recently consulted on changes to national planning policy to strengthen the role of permitted development within the current planning system by restricting the use of Article 4 Directions. If the proposed changes to the NPPF are progressed, it will be difficult for LPAs to use Article 4 Directions to control the use of Class MA PD rights within their area.

Is the new Class MA here to stay?

The Housing Communities and Local Government Committee recently launched an inquiry into the recent and proposed changes to permitted development rights, which closes on 30 April 2021. However, it is hard to see what impact the inquiry can have on the existence or scope of the Class MA right. Similarly, it seems unlikely that any action for judicial review against the government’s decision to introduce Class MA would be successful. Unless the ongoing judicial review brought by Rights : Community : Action against the introduction of Use Class E is successful on appeal, it looks as though the new Class MA PD right is here to stay until removed by a future government.

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