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Retail to residential conversions drop 17% as councils restrict developers’ rights

With the government consistently missing its housebuilding targets, Britain’s housing shortage has now reached crisis point, with the number of prospective renters and buyers dramatically outweighing the volume of homes on the market across most parts of the country.

Whether the government’s target of building one million new homes over this parliament is a realistic one remains to be seen, but either way more needs to be done to increase the supply of much needed new homes across the country, which includes alleviating the challenges and obstacles facing residential property developers.

But new data released today shows that the number of homes being created by converting offices and other non-residential space has dropped, contributing to a wider fall in housebuilding levels.


The number of retail properties approved for conversion to residential property has dropped 17% in the last year, from 453 in 2017/18 to just 376 in 2018/19, according to Boodle Hatfield, a major private wealth law firm.

Boodle Hatfield says that the fall in conversions is being driven in part by local authorities restricting developers from using ‘Permitted Development Rights’ (PDR). PDR is the system that allows developers to convert commercial property to residential use without a full planning application.

The PDR system was introduced in 2013 to incentivise developers to convert disused commercial property into housing, helping to reduce the shortfall in new homes built.

However, some local authorities have now started to restrict use of PDR for converting shops to housing, as they wish to protect their stock of retail property in the hope that the market will rebound.

Research from Savills recently found that even by 2021, only 260,000 new homes are likely to be built. 

Dennis Ko, partner in the real estate team at Boodle Hatfield, said: “With the number of retail units standing empty around the country, it’s surprising that a growing number of councils are opposed to seeing new residential units replacing them.”

“While it’s important to ensure the right mix of residential and commercial property, especially in town centre areas, disincentivising developers from creating new homes is unlikely to be the best way to do it.”

With the government failing to address the issue of housing supply, there is a growing shortage of rental properties causing rents to rise in many parts of the country, and that trend looks set to continue moving forward. 

Ko added: “It would be great to see the new government make far-reaching reforms to the planning regime. Much has been promised by several previous governments, but the planning system still works to prevent a lot of vital residential development.”

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