The failure to deliver enough homes means buyers have to settle for overpriced and substandard housing
The past few weeks have seen considerable media coverage around office-to-residential Permitted Development Rights (PDR), particularly the nature - and quality – of the homes that are being delivered via this route.
These rights – which were introduced in 2016 after an initial trial period – allow developers to convert existing offices into residential dwellings without the need for planning permission. Since they were made permanent, they have contributed an average of 14,000 new homes per year to the housing supply (about 7% of the total, according to government data).
Recent reporting has largely focused on the size of some of the homes delivered – in some cases smaller than a Premier Inn bedroom – as well as their inappropriate location on industrial estates and other non-residential areas.
Predictably, the response has been a call for more planning. This is what happens, so the argument goes, if you don’t have a planning system – developers build rubbish homes.
However, it’s an argument that misses the key point – homes being delivered via office to residential PDR are a symptom of a wider problem. This isn’t what happens if you don’t have planning controls, it’s what happens if you have highly restrictive planning controls that limit the number of homes that can be delivered, and then relax them in one area.
This is what happens if you have highly restrictive planning controls, and then relax them in one area
There is an episode of The Simpsons where Homer is elected as Springfield’s garbage commissioner. To pay for the promises he made to the electorate, he agrees to bury neighbouring Shelbyville’s rubbish beneath Springfield. For a time, everything goes well, until there is so much rubbish beneath the town it starts bubbling up at the surface. Homer tries to tackle the problem by stomping it down, only to see it bubble it up again somewhere else.
Like the garbage beneath Springfield, rising house prices, small home sizes, poor quality design and escalating land values are all symptoms of a single, larger problem: we aren’t delivering enough homes. Squash down problems in one area and they will inevitably bubble up in another.
With a discretionary planning system drip-feeding land into the housing system, the number of homes in any given location is restricted. Those restrictions have two critical effects when it comes to PDR being utilised.
Firstly, they push up prices – according to a 2016 study, as much as 38% of the price of the average home in England is down to planning constraints, making even poor-quality housing more attractive to developers financially than offices.
If all that is available in your price range is a 13m² flat in the middle of an office park, you’ll take it
Secondly, with too few homes being built, developers don’t compete on size or quality, they compete on location. If you need to live in a specific area – for work or family reasons, perhaps – you have to settle for what you can afford. If all that is available in your price range is a 13m² flat in the middle of an office park, you’ll take it – you have no choice. The same is true if you need a house with four bedrooms and the only option is badly proportioned with a small garden and just one off-street parking space.
This isn’t to defend office to residential PDR. Let’s treat this as a symptom of the housing crisis – a particularly noxious one. But let’s not get distracted from the underlying problem that this symptom is pointing to. We need to deliver more homes.
Increasing the supply of new homes will not only moderate house price rises, but will also give potential homebuyers more choice, forcing developers into competing on size and quality as well as location. If there is plenty of choice available in your price range and in the location you want to live, you’ll choose the one that’s best designed.
The true scandal here isn’t the size and quality of the homes delivered by office to residential PDR – it’s that people feel they have no choice other than to live in them.
Paul Smith is managing director at The Strategic Land Group