Retail to Residential: A Golden Opportunity?

In towns and cities across the UK, retail units are sitting empty. Meanwhile, the demand for affordable housing continues to grow. Do changes to Permitted Development Rights provide a golden opportunity for developers to profitably address both issues?

Changes to Permitted Development Rights

Repurposing Class E (retail, commercial and office) space into Class C3 (residential) has always been an option. The challenge has been the time and cost involved in Change of Use applications, with no guarantee of approval. Arguably, this is about to change.

From 1 August 2021, amended Permitted Development Rights include Class MA permits ‘Change of use of a building and any land within its curtilage from a use falling within Class E (commercial, business and service) to a use falling within Class C3 (dwellinghouses)’. You can read more details in our April article on Permitted Development Changes.

The Opportunity Offered by Class MA

There is no shortage of empty retail space on the market. This Financial Times article states that the collapse of Debenhams and Arcadia made 15million sq feet of retail space available in England and Wales and there is minimal demand. Vacant shops were an issue before the pandemic hit and lockdown has pushed more retailers towards e-commerce.

It will not be a challenge to find buildings that have been in commercial, business and service use for a minimum of 2 years and vacant for at least 3 months immediately before the Prior Approval application (not including periods of closure due to lockdown), and this would satisfy at least one of the ‘Conditions’ should an owner / applicant seek a change of use via the Class MA and Prior Approval process.

Converting retail to residential can be highly profitable projects for developers and Class MA will make it easier to build a portfolio of habitable properties. This change to Permitted Development arguably makes it more difficult for local authorities to challenge or block Class E to Class C3 conversions, because it removes the normal consideration of planning policy that seek to prevent the loss of retail floor space, and to protect the commercial vitality of a town centre.

Local Authorities can still use an Article 4 Direction to remove Permitted Development rights, with temporary or permanent effect, but only if their assessment presents justifiable concerns. In this respect, Robert Jenrick, Housing secretary, has issued a written ministerial statement providing explicit guidance on the use of Article 4 Directions, advising local planning authorities that he will intervene where he disagrees with their use, and explaining that it would be very unlikely he will allow them to extend to the whole of a town centre.

Otherwise, local planning authorities must consider a proposed change of use via a Prior Approval application and contain their assessment to:

• Transport impacts of the development, specifically safe site access
• Contamination and flooding risks
• Impact of noise from commercial premises on occupiers of the development
• Whether it impacts the character or sustainability of conservation areas
• Provision of adequate natural light for habitable rooms
• The potential impact of the loss of services including a registered nursery or NHS health centre

Given a choice between boarded-up High Streets or the development of flats or houses, one would expect most residents and authorities would opt for housing.

The Risks of Converting Retail into Residential

The Royal Town Planning Institute (RTPI), the Royal Institute of British Architects (RIBA), the Chartered Institute of Building (CIOB) and the Royal Institution of Chartered Surveyors (RICS) all expressed concern that these changes to Permitted Development “present a risk for our nation’s town centres and small businesses”.

Even in decline, our village stores and High Streets are social hubs which provide essential goods and services. Should the first port of call be for local authorities to offer incentives that encourage independent business and community groups to take on retail units? Class MA reduces the option to explore alternatives before granting developers permission.

There is also concern that, without planning permission, integrity can be compromised. It is easier for low-quality developments to go ahead, compromising the lives of future occupants. There is significant evidence that sub-standard housing has negative health, welfare, economic and environmental impact. These were concerns expressed to the government during its consultation in respect to Class MA, and it contends the final version includes provision for reasonable living standards to be secured. Nonetheless, many commentators remain concerned.

Apex Planning Consultants has extensive expertise and knowledge of the planning process. If you would like further information on the changes to Permitted Development Rights specific to your development project get in touch without obligation.