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Government warned of damaging impact of “uncontrolled conversions to residential” on high streets

Tom Bottomley
01 February 2021

The British Property Federation (BPF) is launching an appeal today to urge the government to recognise the damaging impact “uncontrolled conversions to residential” could have on the future of the UK’s high streets – hitting local government finances in the process.

It comes after the government’s consultation proposing a new Permitted Development Right ((PDR) – to enable more commercial, business and service premises on high streets to be converted into residential without planning permission – ended last week.

The proposal has been positioned as “supporting new housing delivery”, and part of the solution to the challenges facing UK town centres and high streets. However, the BPF believes the policy would have significant adverse consequences and exacerbate the decline of high streets, far outweighing any positive contribution to new housing supply.

Ian Fletcher, Director of Real Estate Policy at the British Property Federation, said: “New residential development will play a vital role in town centre recovery post-COVID, but poorly-planned PDR homes will do more harm than good. It will result in quick delivery of new homes in a piecemeal approach, without taking into consideration what the entire high street requires to successfully serve the community.

“An holistic approach to a high street’s future will ensure new homes are planned for, to ensure the right balance is achieved between residential and the other offers – whether that be shops, gyms, restaurants, nurseries, soft play for kids and sports halls – so that every business and new home support one another, to create coherent and thriving neighbourhoods.

“This new PDR will take control away from local authorities at a time when our high street’s future depends more than ever on strong local leadership and vision.”

The BPF stress that Post-COVID high street recovery will depend on a vibrant and carefully curated mix of retail, residential, leisure, hospitality, education, healthcare, logistics and community facilities and services.

Rather than encouraging careful consideration of what might be the most appropriate use for a store and its location, within the context of the entire high street, the new PDR will result in property developers prioritising residential, impeding any impetus for lower value uses such as independent retailers, crèches or community hubs, which do not offer the same swift financial returns but are vital to providing high streets with a unique identity, more purpose and diversity. Such elements will be required to increase footfall in town centres when it is safe to do so post-COVID.

PDR was first introduced in 2013 and served its purpose as a temporary measure to help tackle the housing shortage by bringing derelict offices back to life as new homes.

According to government data, the quantum of PDR conversions to residential has been falling. In 2018-2019, there were 14,331 conversions and in 2019-2020 this dropped by 1,486 to 10,589. Given the peak of 17,751 conversions in 2016-2017, PDR has been steadily losing momentum. The BPF says the new proposed PDR policy would undoubtedly reverse this trend on high streets.

Additionally, while there are many examples of high-quality PDR homes, there is growing evidence of, and media attention on, poor-quality PDR homes, eroding trust in developers.

According to the BPF, growing distrust of the property sector and the development process will make it more difficult for responsible developers to bring forward much-needed high-quality investment, which will underpin a more positive future for the high street.

The new PDR would also hit already stretched local government finances. An anonymous example of a parade of 80 commercial premises would generate an income of £542,500 in business rates, but when half is converted into 50 flats - rates paid by 40 commercial premises and council tax paid by 50 flats - the income would only amount to £337,000. That’s a decrease of 38% in income for local finances.

Furthermore, by using PDR, local authorities do not collect any contributions towards affordable housing, schools and other social infrastructure, which are applied to traditional planning applications. The government’s proposal would likely encourage new PDR at a scale which towns have not experienced before, but the delivery of such homes will not address increasing pressure on local resources such as GPs, car parking and classroom sizes in schools.

As an alternative to the new PDR proposal, the BPF suggests that the government considers how to better incentivise local authorities to adopt Local Development Orders - to enable greater flexibility on the high street, but with the local authority leading the charge for this positive change.

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