Government proposes a shake-up of Permitted Development Rights; signalling positive growth potential in 2021

easyMoney focuses on lending to residential real estate developers in affluent areas of the UK and, despite the pandemic, 2020 was a good year for easyMoney’s residential borrowers.

easyMoney avoids commercial property - this has been the area of the market which has been more challenging. However, in a bid to help the sector in July last year, the Government made radical changes to the 1987 Use Classes Order with the introduction of The Town and Country Planning (Use Classes) (Amendment) (England) Regulations 2020 (SI 2020 No.757). Coming into effect on 1 September, the new regulations bring together many commercial property uses previously classed within A, B and D, typically found both on the high street and in industrial areas, under the new umbrella of Use Class E.

Coinciding with the greatly discussed White Paper ‘Planning for the Future’ and a string of changes to the planning system, the Government has launched a consultation into its recent restructuring of the general permitted development order. MHCLG is proposing a new permitted development right for the change from any use of a Class E property to residential use within Class C3. Considering the wide extent of uses that now fall within Class E, including, but not limited to shops, restaurants, offices and medical facilities, this new proposal will greatly increase the reach of existing residential conversion rights.

Central to this proposal is the long-term impact COVID-19 is having on the retail sector. Retail spaces are becoming less and less viable and owners are looking for long-term security for their holdings in response to the ever-increasing numbers working from home. In this proposal, government is seeking to provide better flexibility to change between use classes for owners of retail properties, allowing them to respond to rapidly changing market demands. This is exemplified with the likes of industry titans John Lewis announcing plans to target 40% of its total income from non-retail activities, with the bulk of this coming from property development; two planning applications in London are expected early next year.

Although there is no proposed size limit to the properties that would be able to benefit from the PDR there are certain carve outs to where it would be applicable: world heritage sights, national parks and areas of outstanding beauty will be excluded although conservation areas will not. There have been allowances made for the conservation value that shop frontage brings to conservation areas and the right will consider Prior Approval of the impact of losing ground floor retail use to residential. Properties with certain designations, such as listed buildings, would also fall outside of the PDR.

Further to the geographical restrictions listed, Prior Approvals will be required in a number of instances relating to the safety and the quality of life of new residents. For example, changes in use would be subject to ensuring that residential development was not initiated on contaminated land or in areas at risk of flooding, and that all habitable rooms had sufficient natural light. Prior Approvals will also be required in relation to fire safety, transport and the effect of noise pollution on residents, and all new residences will be subject to the nationally described space standards.

The consultation also seeks a response to streamlining the approval process in rolling out public infrastructure improvements and to introduce an additional new PDR permitting hospitals, educational facilities and prisons to increase their facilities by up to 25%. The consultation is open to responses until 28 January 2021 and the changes, if approved, would come into force on 1 August 2021.

All this amounts to a clear indication by the Government of their commitment to Boris’ “Build, Build, Build”manifesto and an insistence that the building and construction industry continue to operate. This has been reflected despite the disruption of the pandemic in the consistent growth shown in the IHS Markit/CIPS construction purchasing managers’ index where a reading above 50.0 indicates expansion and a reading below signals contraction. December’s reading of 54.6, barely changed from 54.7 in November, marks 7 months of expansion since June with total new orders having increased.

Even more encouraging was that house building was by far the best-performing area of construction activity in December (index at 61.9), maintaining that the prospect for residential home builders remains positive. Duncan Brock, CIPS’ Group Director, commented: “the strength of the pipeline of new work, especially from a robust housing market, means the sector is moving in the right direction and hopeful of getting through the winter unscathed.”

In combination with the new government proposal, these figures suggest the potential for continued growth in building and construction throughout 2021, particularly in the residential market. At easyMoney we feel confident that our carefully chosen, predominantly residential focused loans will continue to perform this year. easyMoney selects the loans you invest in and we lend your money to property professionals who require short-term bridging or development loans to build and develop quality UK real estate provided they meet our stringent lending criteria.

Remember that property is subject to market conditions and therefore your capital is at risk. Peer-to-Peer Investments are not cash savings accounts so they are not covered by the Financial Services Compensation Scheme (FSCS).

easyMoney is not a cash savings account. You may not get back the full amount you put in. Your capital is at risk if you invest. Peer-to-peer investments are eligible for an Innovative Finance ISA which is not a Cash ISA. They are not protected by the Financial Services Compensation Scheme (FSCS). Money invested through easyMoney is concentrated in property and could be affected by market conditions. For the same reason, instant access cannot be guaranteed. We do not offer investment or tax advice.

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