Product innovation is the key to get Britain building

The new Labour government has made planning reform central to its mission to drive economic growth and to ‘get Britain building’.

These were the very words used by Rachel Reeves in her first speech as Chancellor and just over a week after this statement of intent, the King’s Speech to the Houses of Parliament went into more detail, announcing the new Planning and Infrastructure Bill.

This new legislation introduces a range of reform all aimed to ‘turbocharge building of houses and infrastructure’. Highlights include 300 more Planning Officers to speed up consent as well as reform to the rules concerning compensation from Compulsory Purchase Orders.

Allied legislation introduced in The English Devolution Bill also gave the mostly Labour, metro mayors, new powers to create Local Growth Plans. Deputy Prime Minister Angela Rayner has previously promised these will help mayors “deliver local economic growth with better housing”.

And in Labour’s three-pronged approach, the proposed reforms to the National Planning Policy Framework (NPPF) are currently out for consultation, which closes on 24 September. Included in this, is the proposal to simplify the granting of consent for major infrastructure projects – such as hospitals and electricity pylons, the labelling of more schemes as ‘Nationally Significant Infrastructure Projects’, granting final approval to the housing secretary rather than local councils. Brownfield development will be given a default ‘yes’. PDL redevelopment restrictions in the in the green belt will be relaxed. There’s a lot of planning reform covered in the 15 Chapter consultation!

So one question has to be, will lenders react to and get on board with the raft of proposed policy changes? For example, will we see new products designed specifically to boost the re-development of PDL? Or enhancements to existing ‘green’ products? All designed to encourage developers to invest in sites and projects that are inherently more difficult, time consuming and often less profitable to deliver.

What isn’t included in the NPPF is any further relaxation of permitted development rights (PDRs) that the previous Conservative government softened just a few months before the general election. This is an area we have long been supporters of at Assetz Capital and the numbers simply highlight the scale of the opportunity. It is estimated that there are 165,000 privately-owned commercial and business premises currently empty across the UK with an additional 7,000 commercial and business premises owned by local authorities having been vacant for over 12 months. These numbers will likely grow as business continues to rationalise the commercial space it requires, for example, with the ongoing popularity of hybrid working models, plus the decreasing use of city centre retail space.

That for me is an opportunity currently missed, as a research brief published by the House of Commons Library earlier this year revealed that between 2015/16 and 2022/23, close to 103,000 new homes were delivered through change of use PDRs. Most (89%) were created through the conversion of offices and other commercial, business and retail units.  

Research commissioned by the previous government in 2020 suggested that homes created through PDR were of lower quality than those built through planning permission through the LPA. And that some were in ‘unsuitable places.’ Perhaps that is why the new Labour government is yet to focus on the reform of PDRs to support its goal to build 1.5m new homes in the next 5 years?

The conversion of commercial space to residential could be accelerated further through a further review of current PDRs, perhaps incentives (such as additional tax breaks) for developers, and lenders developing suitable products to meet specific needs and to stimulate demand.

At Assetz Capital, we passionately believe that many urban areas in decline, with empty offices and high streets, could have new life breathed into them through the conversion of empty and decaying commercial spaces. It’s an area we specialise in and have already helped many property developers in this sector. This is why earlier this year we launched our innovative Planning Assistance Loan, which allows developers to buy commercial space before they have acquired the relevant planning permission they need. This enables them to buy when there are good deals to be had and gives them breathing space while they work with their LPA to refine their plans. Once planning permission is received the developer can then switch out onto a refurbishment loan to complete the project. With a £100m fund, there’s plenty of opportunity for us to support developers from the start and we can lend up to £5m – enabling larger projects.

This is just one example of how lenders could get onboard with and show their commitment to revitalising our towns and cities, creating new communities and boosting local economies. As a Manchester based company, we only have to look to our city centre to see the power of regeneration.            

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