Labour needs to encourage property investors to take advantage of Permitted Development Rights (PDRs), investment firm Excellion Capital has urged.
PDRs allow “individuals and developers to make certain changes to buildings or land without the need to apply for, and obtain, planning permission”.
This means that non-residential properties which hold PDRs under planning law can be converted into homes far more easily than those which have to undergo a Material Change of Use.
Robert Sadler, vice president of real estate at Excellion Capital, said: “PDRs provide a great way for property owners and investors to convert struggling assets into new homes without the need to secure planning permission.
“This makes for an extremely fast project turnaround time, which can be highly attractive to lenders who often see PDRs as a low-risk venture with fast returns.
“As the government pushes to meet its heady new home delivery targets over the next five years, PDRs could play a central role, especially in those places where land and space is limited.”
He added: “There is also currently tremendous availability of relatively low priced debt for residential projects, which means, in the right hands, there are some incredible opportunities just waiting to be unearthed with PDRs.
“It is strange, therefore, that the number of instances where PDRs are being used to create new homes has fallen over the past year. A recent survey of ours reveals that high interest rates were the most pressing concern among property investors in the UK, so perhaps the falling number of PDR instances is because high interest rates required lower leverage and ultimately meaning more equity was required.
“But now that interest rates are trending downwards, a previously high interest environment shouldn’t be enough to put investors off taking advantage of great opportunities when they arise. And that’s where we at Excellion Capital come in – by recourse to our strong lender relationships, we always know the best priced debt at the right leverage, for these projects.”
The Labour government has pledged to deliver 1.5 million new homes by 2029 which, as it stands, demands an annual delivery total of well over 300,000.
The latest net housing supply data shows that, last year (2023-24), 198,612 new-build homes were delivered across England.
New home delivery through Material Change of Use
Material Change of Use is the process of changing the ‘use class’ assigned to a property under the Use Classes Order 1987. For example, changing an office building (Class E) to a residential building (Class C3).
Excellion Capital has analysed change of use data from the UK government and found that across England last year, 21,591 non-residential properties underwent a change of use to be converted into residential dwellings, marking an annual decline of -3.1%.
In Yorkshire & Humber, 3,347 non-residential properties underwent a change of use last year, which represents an annual increase of +70.4%. In the East Midlands, the number increased by +13.3%, and the East of England saw an uptick of +7.4%.
But for property investors who are looking to take advantage of the opportunities presented by Material Change of Use, the process of obtaining the required planning permission can be laborious, lengthy, and often expensive.
However, there are opportunities for investors to change the use of non-residential property without having to obtain planning permission, and this is through Permitted Development Rights (PDRs).