Two years since the introduction of permitted development rights (PDR), aimed at making it quicker and easier to convert light industrial units (class B1[C]) of less than 500 sq m (5,382 sq ft) into residential units (class C3), the scheme has not had anywhere near the take-up the government was hoping for.

Applications have been slow coming in. A high proportion of those have been turned down as unsuitable and, in the process, some well-publicised horror stories have emerged of sheds crammed with uninhabitable, windowless flats by unscrupulous developers.

As a result, some of the industry experts Property Week spoke to say the idea was a mistake from the start and are calling for light-industrial-to-resi PDR to be scrapped, while others believe that – with a bit of tweaking – it could be fixed.

“Most light industrial buildings aren’t suitable for conversion into resi accommodation,” says Mark Jackson, director in the planning and development team at Cushman & Wakefield Birmingham. “How many light industrial buildings are there that are less than 500 sq m? And of those, how many are in an appropriate location for residential? It may not have been worth trying in the first place.”

Out of a total 195,044 permitted development applications to local authorities in England to the end of June this year, according to official Ministry of Housing, Communities & Local Government statistics, the total number of industrial-to-residential applications was just 468. Of those, 205 have been refused approval.

Compare that with 3,511 applications for office-to-residential changes in the same period, as well as 3,755 agricultural-to-residential submissions, and a clear picture emerges: there just isn’t much appetite for changing sheds to houses out there in the market.

According to Alex Ground, partner in the real estate team at law firm Russell-Cooke, this is partly because the cost-to-return ratio on carrying out the works is so low.

“The difference is that office conversions tend to be more cosmetic than structural. But sometimes, with light industrial and storage to resi, you’d have to conclude a lot of structural changes to make it suitable for residential accommodation,” she explains. “PDR doesn’t allow you to do any external changes.”

‘Cutting corners’

Julia Park, head of housing research at Levitt Bernstein, says the use of permitted development has allowed some terrible-quality builds that would never have made it through a full application.

“The planning system exists for a reason,” she says. “Development control sifts the bad from the good. PDR has opened the door to unscrupulous developers that are only interested in profit margins. Cutting corners obviously saves money, but it’s been shocking to see how far some are prepared to go.”

While the planning system is there to prevent these abuses, it can be an extremely lengthy and protracted process, which PDR was intended to bypass. And, to an extent, it has achieved this, argues director of residential development at Colliers International Andrew White.

“Permitted development is essentially a response to a very poor planning system that hasn’t delivered on housing numbers over the years,” he says. “It’s become more and more protracted. So many sites are held up in planning because of planning committees and planning systems. I welcome anything that delivers more housing.”

Poor take-up: out of 195,044 permitted development applications to local authorities to the end of June, the total number of industrial-to-resi applications was just 468. Of those, 205 have been refused approval

Jason Lowes, partner in the planning team at consultancy Rapleys, says that developers and landowners are not against the intent of PDR. “Our clients are always keen for things that make development simpler and easier to predict,” he says.

“PDR hasn’t been a failure; there just aren’t many properties out there that are suitable for doing it. There aren’t many properties out there that tick the boxes that the government has imposed in the right locations.”

While many of the developers Property Week spoke to believe that PDR in general has its place, Nick Taylor, partner in the planning and development team at Carter Jonas, thinks there is a case for getting rid of industrial-to-resi PDR.

“If you’re going to get rid of one of the types of PDR then it would be this one,” he argues. “I can see that it still has a role to play for offices, but is PDR for light industrial going to generate that many opportunities? The question is: if you’re going to adjust PDR, how far do you go?”

Potential solutions

One answer some developers believe in is increasing the size of the industrial units allowed by the PDR from 5,381 sq ft to enable larger residential builds to be done. They feel this would increase developers’ profit incentive for the amount of money that needs to be spent. Another solution is to look at quality rather than quantity. Ground says that if light-industrial-to-resi PDR included a similar degree of quality control as a full application, there would be no reason to scrap it.

“Most of the complaints centre around the quality, not the fact they have circumvented the affordable housing requirements,” she says. “They could just add higher requirements on the quality without doing away with the whole premise of this to drive up the housing stock.”

Industrial-to-resi PDR hasn’t made a meaningful difference to housing supply. The question now is whether the government will decide to amend it or scrap it altogether