Written evidence submitted by the Mayor of London / GLA [PDR 095]

 

The aim of the HCLG inquiry is to examine the Government’s recent and proposed changes to permitted development rights in respect of large-scale development, commercial-to-residential conversions and changes of use between different types of commercial and retail premises. In particular, the inquiry will explore their role in supporting economic growth and their impact on local authorities, including their ability to plan development holistically, developer contributions, the provision of services and social housing and the supply and quality of new homes.

 

HCLG Committee Terms of Reference

 

With specific reference to permitted development in respect of large-scale development, commercial-to-residential conversions and changes of use between different types of commercial and retail premises, the HCLG Committee asks:

 

  1. What role should permitted development rights (PDR) play in the planning system?
  2. What is the impact of PDR on the quality and quantity of new housing, including affordable and social housing?
  3. What is the impact of PDR on local planning authorities, developer contributions and the provision of infrastructure and services?
  4. Is the government’s approach to PDR consistent with its vision in the Planning White Paper?
  5. What is the impact of PDR on the ability of local authorities to plan development and shape their local communities?
  6. Is the government right to argue that PDR supports business and economic growth?
  7. What is the impact of PDR on the involvement of local communities in the planning process?
  8. Should the government reform PDR? If so, how?
  9. In addition, written submissions may touch on any other matter relevant to the government’s approach towards these kinds of permitted development.

 

 

 

 

 


Mayor of London / GLA Evidence

 

  1. What role should permitted development rights (PDR) play in the planning system?

 

1.1              There is a role for permitted development rights in the planning system but the scope and content of permitted development rights must be appropriate and sensitive to the needs and circumstances of each location.

 

1.2              Nationally-set PDR introduced by government are not sensitive to local circumstances and would result in significant negative impacts on:

 

(a) London’s nationally significant office locations (including the unique agglomeration of the Central Activities Zone (CAZ), the Northern Isle of Dogs and other locations in and around central London);

(b) larger town centres in outer and inner London, which share characteristics with city centres elsewhere in the country; and

(c) smaller town centres, high streets and local parades which provide sustainable access to goods and services to Londoners and are accessible by walking and cycling.

1.3              Furthermore, nationally-set PDR tempers potential housing delivery and fails to deliver good quality, affordable homes for Londoners and is harmful to businesses, communities and the many economic sectors that are already struggling as a result of the pandemic and exit from the EU. Intervention is required to avoid runaway, arbitrary and irreversible losses of business premises and the knock-on impact this has on the economy (please see evidence below in relation to questions 2-9).

 

1.4              Instead, in those areas where devolved arrangements are in place, government should be seeking to devolve powers for introducing permitted development rights to Mayoral authorities including the Mayor of London so that more nuanced and place-specific PDR can be drawn up, in collaboration with local authorities and other stakeholders. For other areas, consideration should be given to whether local or even neighbourhood permitted development rights should be promoted. However, it is noted that there is already provision for these within the planning system and there is a relatively poor take up because of the harmful impacts as set out below. Ultimately the absence of PDR does not mean such proposals do not happen: simply that they need to comply with other planning policies within the statutory development plan for the area.

 

 

  1. What is the impact of PDR on the quality and quantity of new housing, including affordable and social housing?

 

Quality of housing and meeting housing need

 

2.1               Permitted development has already demonstrated a clear inability to deliver high-quality well-designed homes as highlighted by the government’s own impact assessment as well as independent research[1] and an investigation by the London Assembly[2]. Consideration of light and noise impacts, together with the new requirement to meet national space standards are not sufficient to deliver the quality of housing that Londoners need. The parameters fail to consider other important design and technical standards that make houses into well-designed and functional homes. Through PDR there remains no mechanism to assess essential design considerations around outdoor private or communal amenity space, access and inclusion, privacy, or energy efficiency for example – all of which are included in London Plan policy for their role in ensuring quality internal environments.

 

2.2               The planning system promotes the redevelopment of premises that are not particularly valuable for employment use and/or that have been identified for redevelopment in Local Plans for their potential role in providing transformational area change and regeneration.

 

2.3               Where a site’s redevelopment is supported, the Class E to residential PDR risks conversion solely to residential use rather than supporting a mix of uses including flexible business space, community uses, schools and other types of social infrastructure, necessary for sustainable place-making and to ensure public buy-in. Unlike permitted development utilising an existing building footprint, redevelopment through a planning permission is almost always likely to result in a net increase in overall floorspace. Uses can therefore intensify or increase and co-exist alongside housing. Permitted development on the other hand is a zero-sum game, where in order to gain what are often poor-quality homes, other important uses are unnecessarily sacrificed.

 

2.4               In addition to lost opportunities relating to floorspace, larger sites developed through PDR would also fail to secure wider place-making objectives such as improved permeability and provision for active travel, access, or the introduction of green and play space. Accessible outdoor space in particular, has proved to be even more essential during the COVID-19 pandemic.

 

2.5               In terms of fire safety, it is unclear how - in line with the Government’s review of the Building Regulations and Fire Safety - applications for PDR will be subject to a fire safety consideration, including referrals under Gateway 1 (where buildings are in scope). This requires urgent clarification. It is also unclear how people who need level access will be evacuated from buildings in the event of a fire. The fire safety of people and property is a priority for the Mayor and the London Plan requires the inclusion of an evacuation lift.

 

2.6               Differentials in the value of land in housing and commercial use in London leads to strong pressure for conversions via PDR. The London Plan Viability Study[3] provides evidence on the relative values of office and residential in different parts of the capital and suggests that in very broad terms, average residential values exceed average office values in most parts of London including substantial areas within the CAZ. There is also a degree of volatility in office rental values over time and across business cycles related to the wider economy. It is very likely therefore that at different points on the business cycle, residential values could exceed office values in all parts of London even within the CAZ[4]. Without regulatory intervention, a free market approach through PDR will fail to deliver the business floorspace that London needs and result in significant negative impacts on existing employment clusters (please see response to Question 6). Furthermore, PDR would severely impact on transactions of commercial property as commercial occupiers cannot outbid residential developers owing to the value differentials between these uses, and PDR effectively removes the safeguards to the loss of commercial space typically afforded through the planning system.

 

2.7               Not only does permitted development miss opportunities for quality internal and external design and wider area improvement, but the burden of development is not mitigated by the development itself and instead falls off-site, for example, by adding pressure to on-street parking, social infrastructure and local parks and open spaces. This works to fuel anti-development sentiment in local communities, breaking down the relationships between local planning departments and the public and in turn ensuring community engagement and collaboration in the plan-making process will be harder to achieve. Development achieved in this way is at extreme odds with the recommendations of the Building Better, Building Beautiful commission’s report ‘Living with Beauty’[5], which promotes stewardship and refusal of development which might undermine the spirit of the community and promotes mechanisms to empower the community to improve linkages between local democracy and development.

 

2.8               As well as failing to secure quality, schemes delivered through permitted development will not deliver the tenure and size of homes required to meet Londoners needs. The issues surrounding lack of affordable housing delivery are discussed in more detail in paragraphs 2.12 – 2.25 below. In terms of housing size mix, the London Plan is clear that proposals for residential development should generally consist of a range of sizes based upon local evidence of need. In London, evidence[6] suggests that at the strategic level the need for 1, 2, 3 and 4 bed plus homes is 30%, 27%, 25% and 19% accordingly. Between 2013 and 2020, of the units delivered through permitted office to residential conversion, 77% were studio or 1 bed and 21% were 2 bed. Only 1.4% comprised 3 bed homes and 0.3% 4 bed plus, far short of London’s need and unsurprisingly heavily weighted towards smaller units that will deliver the best financial return. It should be noted that it is not known if the size of these homes met the minimums set out in national space standards, as throughout this period the need to ensure a policy compliant level of internal floorspace was not in place.

 

2.9               Again, it must be observed, that delivering homogenous and sub-standard homes - where the needs of families are not accounted for - will hardly facilitate the building of collaboration and trust between local authorities and the public that the Government claims to seek. Instead where residents see limited benefits to area change, confidence in the planning system will only be weakened.

 

2.10           Finally, the forthcoming Class E to residential PDR would miss out on opportunities for significant housing delivery where sites have already been identified for redevelopment for residential or residential-led mixed use (in some instances including the existing on-site uses). Following the permitted development route utilising existing building footprints, layouts and scale - fails to realise a site’s optimum potential benefit which can only be achieved through masterplans or design considerations that would account for the sites’ features and context and enable appropriate higher density development. It is this process that ensures sites are optimised in terms of housing delivery and ultimately PDR may produce new housing but, on many sites, this will be less than could or should have been achieved. Cumulatively this impact will be significant. Given the national housing crisis that we face and constrained land supply, it is essential that all sources of supply – if appropriate for housing delivery – are utilised to best effect.

 

2.11           Whilst it may be argued that permitted development doesn’t preclude densification or comprehensive development in the medium or long term, once a building is occupied by homes, long-term redevelopment - which would also have sustainability benefits – is far less likely to occur. This is especially true where multiple leasehold occupiers are present – the more likely scenario than direct rental from a single freeholder. 

Affordable housing

2.12           Unlike development delivered through grant of planning permissions, commercial to residential PDRs do not make provision towards much needed affordable housing.

 

2.13           The Mayor has identified a need for 66,000 new homes to be built per year in London for at least the next 20 years. In order to tackle acute issues of affordability, overcrowding and homelessness, around 43,500 of these need to be genuinely affordable homes. The Mayor will utilise funding and planning powers to address fundamental constraints to increasing the supply of affordable homes. This includes, making direct investments in affordable housing through the Affordable Homes Programme, embedding affordable housing requirements into land values through the London Plan, and implementing policy and programmes to diversify the housing market.

 

2.14           However, whilst increasing affordable supply is necessary, despite positive Mayoral interventions, wider influences on the housing market outside of the Mayor’s control – such as, deregulatory processes, low interest rates[7] and market absorption rates[8] continue to have an impact on affordability. In 2020, average house prices across the capital reached almost 12 times average incomes. This represents the widest house price to earnings disparity compared to any other area of the country and is considerably higher than the overall national picture, where house prices are just under 8 times average incomes[9]. In addition to the decreasing likelihood of Londoners being able to afford to buy their own home, those who are currently housed - in social rent, mortgaged or private rented accommodation are also far more likely to spend more than 30% of their income on their rent or mortgage. As acknowledged in the Government’s English Housing Survey[10], expenditure above this point will potentially lead to housing stress.

 

2.15           A key outcome of the affordability crisis in London’s housing market, is a rise in homelessness and an increase in individuals and families being housed in temporary accommodation at a significant cost to the already stretched public purse. In the period 2019-20 alone, net expenditure on temporary accommodation by the London boroughs reached £194m. This accounted for 59% of the £330m spend across all English local authorities. Moreover, London spent a further £158m (36% of England’s total) on prevention of homelessness and associated administration and support.

 

2.16           To meet need and address these issues requires the maximisation of affordable housing contributions from all sources to deliver good quality and genuinely affordable homes. All schemes of 10 units or above in London are expected to maximise the delivery of affordable housing and make the most efficient use of available resources. In some boroughs – those where smaller housing schemes constitute the vast majority of supply - local authorities also seek contributions from non-major housing schemes of fewer than 10 units. This is critical to enabling London to meet the housing needs of its residents and workforce and maintain the function and resilience of the city.

 

2.17           Following a significant reduction in national housing grant in 2011, affordable housing completions in London saw a drop from the previous decade. However, the Mayor’s approach to increasing the delivery of affordable housing through the planning system has seen much success over recent years, helping to reverse this trend. In 2020, on schemes referable to the Mayor, 37% of homes permitted were secured as affordable provision. This is up from just 22% in 2014 and together with the year 2019, is the highest proportion of affordable housing secured per year since 2011. This demonstrates how, with the right interventions, affordable delivery can be maximised without tempering development in general and shows a positive trend towards increased affordable housing across the capital.

 

2.18           Increasing numbers of homes delivered through the new Permitted Development rights - under which affordable housing contributions cannot be achieved - will result in a very substantial loss of potential affordable housing provision. This could impact the positive trends set in train in London and will miss considerable opportunities to ease issues of affordability, homelessness and overcrowding, that are central to the housing crisis.

 

2.19           In London, 13 per cent[11] of the baseline office stock outside the CAZ boroughs[12] converted to residential via PDR in completed development over the period 2013-2020. Based upon a conservative assumption that 10 per cent of the existing office stock under the new 1,500 sq.m size limit could potentially be converted to residential via the new PDR, there is potential for a loss of approximately 1.2 million sq.m of office floorspace over the next 5 years. This could consequently result in around 21,000 dwellings[13]. Assuming that this number of homes instead was to come forward via grants of planning permission, this would have the potential to achieve £0.8 billion in affordable housing contributions over the next 5 years[14], none of which would be realised if sites and associated opportunities are lost through PDR. This figure represents a very significant contribution, equivalent to 20 per cent of London’s grant settlement under the Affordable Homes Programme 2021-26.

 

2.20           Given wider arguments around the potential for loss of land with an important economic function to the city, it should be noted that not all floorspace assumed to come forward for housing through PDR would be appropriate for residential development. As such, it may not be the case that sites would have been granted a permission should a full planning application have been submitted. However, for the reasons discussed below, it is not accurate to assume that the aforementioned level of affordable housing presents an unrealistic estimate.

 

2.21           Firstly, unlike permitted development, as discussed in paragraph 2.2, the planning system promotes redevelopment of premises that are not particularly valuable for employment use and/or that have been identified for redevelopment in Local Plans for their potential role in providing transformational area change and regeneration. As such, it is expected that many sites that would come forward under the new PDR will be those that could have benefited from plan-led, masterplanned redevelopment, thus would otherwise have yielded affordable provision.

 

2.22           Secondly, consider the potential of many existing employment sites to be intensified through a planning permission - producing a net increase in floorspace which mitigates negative impacts on employment at the same time as introducing residential uses. This, alongside arguments made in paragraph 2.9 that PD underutilises sites’ potential - whether for wholescale housing or mixed-use development - suggests that permissioned densities would be significantly higher than what could be achieved under PD. Even if only a proportion of sites redeveloped through PDR could have done so via a planning permission, the unknown potential for an uplift in conventional homes would mean an unknown potential for high numbers of affordable housing in tandem.

 

2.23           As is known, there remains no mechanism to achieve affordable housing through development that has occurred under PDR, thus no way to mitigate against significant impacts on its delivery. However, even if such a mechanism were to be introduced, as per paragraphs 2.1 – 2.4, the quality of homes delivered would render them unsuitable to house those registered on housing waiting lists who have limited choices about their housing options and who are most likely to be families. In some cases PD homes may be used as temporary accommodation for statutorily homeless households or as rented accommodation for formerly homeless people who have been through housing options services. Even if this is the case, this does not mitigate against lost affordable housing opportunities, especially given quality concerns raised.

 

2.24           The direct impact of PDR on affordable housing provision has been made clear, however it is also important to consider the negative repercussions from indirect impacts. Introducing PDR to sites that would be suitable for redevelopment through the planning system is likely to cause land value inflation, as sites converted in this way do not need to account for affordable housing contributions. There is the potential for this to lead to speculative trading of sites at inflated prices, which could undermine the delivery of affordable housing and other infrastructure even on sites that come through the full application process.

 

2.25           To conclude, it is essential that both the direct and indirect impacts on loss of potential affordable housing provision from PDR are considered. Loss of developable land through traditional planning routes, land value inflation, sub-optimal densities, and an inability to tackle affordability and help temper the flow of public expenditure are all key considerations in how PDR impacts upon the ability to deliver housing that meets local needs and address the housing crisis. Overall, significant opportunities to positively impact the lives of those in vulnerable housing situations are unforgivably missed.

 

The White Paper proposal – potential impacts

 

2.26           The Planning White Paper proposed a new national Infrastructure Levy to replace current mechanisms for securing affordable housing and infrastructure contributions which would also apply to permitted development. There is a broad recognition within the planning and development sector that the proposed Infrastructure Levy would not be an effective means of delivering affordable housing and infrastructure and would likely result in a reduction in affordable housing delivery compared to the status quo (see the Mayor’s response to the Government’s Planning for the Future white paper[15]). The Mayor has argued strongly that the current system of ‘Section 106 agreements’ and Community Infrastructure Levy should be retained and enhanced, and that these should be used to require permitted development to provide affordable housing and infrastructure funding.

 

2.27           Whilst further details of the proposed Infrastructure Levy have yet to emerge, the new proposals as they stand are likely to further exacerbate the substantial projected loss of contributions to affordable housing discussed above.

 

 

  1. What is the impact of PDR on local planning authorities, developer contributions and the provision of infrastructure and services?

 

Impacts of PDR on local planning authorities

 

3.1              Government PDRs have been shown to deliver poor quality development and impact negatively on businesses. This erodes the relationship between the local planning authority and the community, creates local confusion and undermines confidence in the planning system. It makes it harder to get buy-in for plan-making and much needed housing development. Furthermore nationally-set PDR impacts on the ability of local planning authorities to plan with their communities for sustainable development that supports positive economic, social and environmental outcomes whilst addressing potential negative impacts of development. (further details on this matter are provided in our response to Question 5).

 

3.2              Local planning authority resources are directly impacted by the additional workload to deal with prior approval applications, which are often as complex as dealing with a full planning application, but without the equivalent level of fees. The proposed fees in the recent government consultation for Class E to residential are considered insufficient and should match those for a full planning application. Local planning authorities’ resources are also impacted by needing to replicate existing Article 4 Directions, the case for which has already been established. The Secretary of State has the power to amend existing Article 4 Directions. This could have been used to transfer existing Article 4 Directions that currently cover office to residential (and other) conversions in appropriate locations.

 

3.3              Change of use from commercial to residential through PDR could also impact on business rates income for boroughs given the differential between council tax and business rates for similar sized properties in many commercial uses.

 

Impact on developer contributions and provision of infrastructure and services

 

3.4              Nationally-set PDR has a significant impact on developer contributions including a very substantial loss of contribution to affordable housing as discussed in the response to Question 2 above. Furthermore, PDR does not contribute to infrastructure delivery which is important to deliver sustainable places including public realm improvements, publicly accessible open space, active travel and urban greening which also contribute to other planning objectives such as amenity, biodiversity and reducing heat risk. PDR also bypasses requirements for minimum onsite carbon reduction (locking in higher carbon emissions in the future) and for carbon offset contributions which are necessary to achieve zero carbon buildings and provide funding for local carbon reduction measures, such as retrofitting existing buildings for example.

 

3.5              There is a broad recognition within the planning and development sector that the proposed Infrastructure Levy would not be an effective means of delivering affordable housing and infrastructure. The Mayor has argued strongly that the current system of Section 106 agreements and Community Infrastructure Levy should be retained and enhanced, and that these should be used to require permitted development to provide affordable housing and infrastructure funding. Without affordable housing requirements in place for permitted development, the new proposals as they stand could see a very substantial loss of contribution to affordable housing.

 

3.6              Given the uncertainty about the operation of the proposed new Infrastructure Levy, the cumulative impact of small and large scale conversions of uses currently in Class E to residential will place significant pressure on all types of infrastructure. The government’s approach to PDR is therefore not supported by an adequate mechanism to secure appropriate provision for, or contributions to, the infrastructure that is required, including transport infrastructure and in-kind benefits to social infrastructure, such as health, education and childcare facilities. The pressure on infrastructure may increase resistance from local communities and, at the same time, either place increased pressure on other development and/or on local authorities to make good from the public purse what the private development via PDR should be doing, or ultimately (given financial realities) mean a growing infrastructure deficit.

 

3.7              The inclusion of health services, creches, day nurseries and day centres within Class E means that these uses are at risk of loss to other uses within Class E. The new national PDR for Class E to residential places social infrastructure at further risk of loss. The Mayor has called for the removal of categories E(e) and E(f) from Use Class E to limit the impact on social infrastructure and mechanisms are needed to stop the conversion of these social infrastructure facilities into other Class E uses and then on into residential.

 

3.8              In the new Class E to residential PDR, government introduced a prior approval criteria to consider the impact of the loss of health centres and registered nurseries on the provision of such local services. However, government did not remove these uses from Use Class E which means that such facilities may be lost to other uses within Class E.


  1. Is the government’s approach to PDR consistent with its vision in the Planning White Paper?

 

4.1               The government’s approach to PDR is inconsistent with many of the objectives in the Planning White Paper. Examples of such instances are provided in the table below:

 

 

Planning White Paper states:

“We wish to: …”

Comment:

A

“be more ambitious for the places we create, expecting new development to be beautiful and to create a ‘net gain’ not just ‘no net harm”

PDR does not contribute to infrastructure delivery which is important to deliver beautiful places including public realm improvements, publicly accessible open space, active travel and urban greening. Moreover, in bypassing the collaboration and scrutiny of design that would typically occur through the development management process, the likelihood of delivering high quality, unique places that benefit and are endorsed by the wider community is significantly reduced. As such, PDR creates net harm. 

B

“…move the democracy forward in the planning process and give neighbourhoods and communities an earlier and more meaningful voice in the future of their area as plans are made… [and] … more engagement should take place at the Local Plan phase”

PDR erodes the relationship between the local planning authority and the community, increases mistrust and undermines confidence in the planning system. PDR removes the ability of local communities to shape their areas in ways which support Good Growth, in turn making it harder to get buy-in for plan-making and much needed housing development. Ultimately, PDR takes away the ability of local neighbourhoods and communities to have a meaningful voice in the future of their areas as the role of Local and Neighbourhood Plans is eroded.

C

“… support home ownership, helping people and families own their own beautiful, affordable, green and safe homes, with ready access to better infrastructure and green spaces

Class E to C3 permitted development would not make any provision towards affordable housing and does not respond adequately to the type and size of homes needed in the local area. Permitted development has already demonstrated a clear inability to deliver high-quality well-designed homes as highlighted by the government’s own impact assessment as well as independent research (please see response to Question 2 above)

D

“… help businesses to expand with readier access to the commercial space they need in the places they want..”

Far from helping businesses to expand, PDR results in less commercial space and active/viable businesses in currently occupied space at risk of eviction (please see response to Question 6 below).

E

“…create a virtuous circle of prosperity in our villages, towns and cities, supporting their ongoing renewal and regeneration without losing their human scale, inheritance and sense of place. We need to build more homes at gentle densities in and around town centres and high streets, on brownfield land and near existing infrastructure so that families can meet their aspirations.

The proposed permitted development rights undermine the adaptation of town centres and high streets to be (and remain) vibrant, successful locations for a range of business, culture, civic and community activities complemented by well-planned housing and mixed-use development. The proposals put at risk the social and economic functions of our high streets, town centres and the commercial heart of cities at the worst possible time. The introduction of piecemeal residential development on the ground floor will risk creating sterile high street frontages, impacting negatively on their sense of place and weakening their attractiveness as places to visit, work and interact. A vicious cycle would then be set in train. (please see response to Question 6 below).

 


  1. What is the impact of PDR on the ability of local authorities to plan development and shape their local communities?

 

5.1              The evidence correlates successful and resilient commercial hubs and agglomerations with management either by BIDs, town centre managers or majority landowners. It therefore follows that removing the ability to curate and manage commercial hubs and town centres has a disproportionate impact on the whole agglomeration, not just the site in question. This leaves local authorities powerless to support their local partnerships and curators of commercial hubs and overly reliant on responsible land ownership. Even BIDs will be powerless to stop the erosion of the commercial activity within their areas.

 

5.2              Government PDRs impact on the ability of local planning authorities to plan with their communities for sustainable development that supports positive economic, social and environmental outcomes whilst addressing potential negative impacts of development. This impact is exacerbated by the absence of criteria related to matters such as affordable housing, infrastructure, prospect of use for activities within Class E and the impact on the sustainability of town centres, high streets and other business locations.

 

5.3              Nationally imposed PDRs impact the effective implementation of Local Plans and Neighbourhood Plans including adopted and emerging Plans including being able to meet objectively assessed need for commercial uses at a time when there is a pressing need to support economic recovery. Similarly, where sites have been identified as suitable for large scale redevelopment for residential use and permitted development fails to optimise the site’s potential for housing delivery, this may have knock on effects for the delivery of housing targets.

 

5.4              Sweeping changes to the Use Class Order in 2020 mean that there are no longer protections in place for sports centres, most shops, post offices, health facilities or nurseries. Small convenience stores are only protected if there is not another similar store within a kilometre. At a time when people want to support their high streets and are more reliant on local services, it’s vital that communities have the ability to decide how to plan their local area in the way that suits them best. New PDR for Class E to residential could have a particular impact on town centres and high streets, including smaller local and neighbourhood centres, and the role they play in providing services which are accessible by walking and cycling (please see our response to Question 6).

 

5.5              The government’s new PDR for Class E to residential will result in uncoordinated conversions of commercial uses to residential and will therefore have a direct impact on boroughs’ ability to meet demand for offices and other commercial floorspace through their Local Plans in line with the National Planning Policy Framework. This has direct consequences on businesses looking for space to start-up or expand and also on the cost of business space in London which is high relative to the rest of the country. Similarly, the government’s PDR could undermine site allocations and the delivery of Good Growth if areas subject to significant conversions become dormitory areas with no local jobs or services.

 

 

  1. Is the government right to argue that PDR supports business and economic growth?

 

6.1              Permitted development rights, when applied sensitively and having regard to local circumstances, can provide businesses with flexibility without significant negative impacts.  Nationally-imposed and broad-ranging permitted development rights however are a blunt tool and give rise to significant negative impacts on the business and the economy. Our evidence for this question is presented in four sub-sections:

 

(a)   Impacts on businesses and jobs

(b)   Impact on London’s nationally significant and other strategically important office locations

(c)    Impact on London’s international shopping, leisure and tourism destinations including the West End

(d)   Impacts on town centres and high streets.

 

 

(a)   Impacts on businesses and jobs

6.2              In London, evidence indicates that existing PDR has impacted negatively on occupied business space, causing disruption to businesses, jobs and people’s livelihoods, threatening the economic and social recovery of London and the wider UK. Data from the London Development Database (LDD) indicates that more than 2 million sq.m. of office floorspace in London received prior approval to convert to residential over the period 2013[16]-2020 of which just over 1 million sq.m. has been completed to date (see Tables 1 and 2 in Appendix 1). Only about 33 per cent of the floorspace affected to date by office to residential prior approvals was vacant while 67 per cent was occupied or part occupied.[17]

 

6.3              Outside the Central Activities Zone (CAZ) boroughs[18] a quarter of the total office stock that existed in 2013 received prior approval for office to residential PDR over the period 2013-2020 and about 850,000 sq.m. (13 per cent of the total office stock) was actually converted to residential through implemented prior approvals[19].

 

6.4               Based on what has occurred to date, it is reasonable to estimate that 10 per cent of office stock under the 1,500 sq.m. size limit[20] would be converted to residential via the government's proposals in the next 5 years. This could equate to around 1.2 million sq.m. of office floorspace of which an estimated 800,000 sq.m. (67 per cent) could conceivably be occupied prior to the 3 month ‘vacancy test’. At an average employment density of 10 sq.m. per worker, this suggests that 80,000 jobs could be disrupted in London. The impact could be significantly higher, however, and an upper range of 20 per cent of office stock under 1,500 sq.m. (equating to an estimated 2.4 million sq.m. and 160,000 jobs disrupted) is also feasible.

 

6.5              There are no tests within the new PDR legislation that would ensure that the commercial use in Class E is genuinely “surplus” to requirements. The test in the legislation for at least 3 months vacancy was introduced by government but leaves businesses vulnerable to eviction by landlords seeking to convert to residential. Whilst we would not want to see premises kept vacant for longer periods, we note that a 3 month void period is not a significant deterrent to business eviction particularly given the value differentials. Vacant space is not necessarily “surplus” to requirements and some level of vacant space provides a critical role in allowing markets to respond to demand, while preventing rent inflation[21].

 

6.6              The proposed new permitted development rights would have a negative impact on creative production and light industrial space and associated jobs. Light industrial space provides relatively affordable space for SMEs including arts, cultural and creative businesses, as well as providing a diverse range of employment for Londoners. But values in residential use far exceed those in light industrial use and there is a risk of more sustained loss of light industrial and creative production uses associated with the new proposed rights with a particular negative impact on London’s town centres and high streets and particular economic sectors which are vital to a city’s eco-system.

 

6.7              Whilst we acknowledge the importance of housebuilding to the UK economy and particularly GVA, the government’s proposed approach will not deliver a resilient and sustainable economic base. It will lead to spiralling costs of securing commercial premises due to a lack of supply and will also lead to business disruption particularly due to the need for grow-on space for expanding businesses. It will also skew delivery away from brownfield site re-development.

 

(b)   Impact on London’s nationally significant and other strategically important office locations

 

6.8              The new Class E to residential permitted development rights threaten the future sustainability of London’s nationally significant office locations and other strategically important office locations in London and would significantly damage the contribution of these areas to the London and UK economy and employment.

 

6.9              The output of the Central Activities Zone (CAZ), Northern Isle of Dogs (NIOD) and a 1km fringe around them stood at just under £228bn in 2017, accounting for nearly 53 per cent of London’s output and just under 13 per cent of UK output[22]. The CAZ and NIOD together contain more than 1.3 million office jobs[23]. The ten CAZ boroughs (incorporating much of London’s nationally significant office space) contained more than 20 million sq.m. of office floorspace in 2019/20[24]. This equates to more than three quarters of London’s total office stock and approximately one fifth of the total in England & Wales[25].

 

6.10          The concentration of offices and other types of employment within the CAZ, NIOD and the other nationally significant office locations give rise to what are termed economies of ‘agglomeration’[26]. Agglomeration refers to the concentration of economic activity in a particular location or area. Agglomeration benefits arise because firms increase their productivity levels by being located in close proximity to one another and by having access to a large pool of labour enabling businesses to attract and retain skilled labour. Clustering and agglomeration offer several other benefits including fostering collaboration and the transfer of knowledge, innovation and technology between business and sectors, and promoting competition which drives efficiency and London’s global competitiveness. Erosion of these agglomeration benefits would have wider impacts on London’s competitiveness and contribution to the UK economy[27].

 

6.11          The government’s new Class E to residential PDR occurs at the worst possible time as central London’s economy has been severely impacted by the Covid-19 pandemic[28]. While there are emerging trends that could affect the nature of office working and the extent of remote working, as well as broader cyclical and structural shifts in demand for office space as a result of the pandemic, the extent of this and its impact on the need for office space in central London has yet to emerge fully and there are a wide variety of potential scenarios, including situations where office demand remains high. The uncertainties created by the pandemic reinforce the need for adaptation, but PDR undermines the ability of boroughs and communities to ensure that this happens in an optimum and effective way to support London’s economic and social recovery.

 

6.12          Central London has the highest residential property prices in the country[29]. There is also substantial evidence that average capital values for residential use in the CAZ exceed average values for office use. While there are some limited localised exceptions where the opposite is the case, there is a degree of volatility in office rental values over time; it is likely therefore that at different points on the business cycle residential values could exceed office values in all areas within the foreseeable future[30]. Introducing new PDR to convert offices in central London would therefore lead to substantial loss of office space. The dwellings that would be developed in central London as a result of the proposals would also be unaffordable to the vast majority of Londoners and would fail to make a significant contribution toward affordable housing.

 

6.13          PDR could undo the careful work of years of master-planning and place-making in London’s Opportunity Areas (such as Kings Cross-St Pancras, Vauxhall Nine Elms Battersea, and the Lower Lea Valley including Stratford) which have brought forward a mix of both residential and employment in places well-connected to public transport. Offices and other commercial uses could be converted to residential use, undermining efforts to create vibrant mixed-use areas with high quality employment opportunities.

 

6.14          In recognition of London’s nationally significant office locations, the government exempted these areas from the permitted development rights when they were first introduced in 2013. The exemptions were replaced in 2019 by specific Article 4 Directions by the relevant boroughs, supported by strategic and local evidence[31]. Local Planning Authorities now have limited time to reintroduce Article 4 Directions to remove the new Class E to residential permitted development rights for these areas. There is no clear reason why these nationally significant locations should not be exempt again for the same reasons and requiring a re-submission appears to be unnecessary red tape.

 

(c)    Impact on London’s international shopping, leisure and tourism destinations including the West End

 

6.15          New PDR Class E to residential would result in significant harm to the West End and other shopping, leisure and tourism destinations across the capital through uncoordinated piecemeal conversions of commercial uses to residential and undermine their contribution to the economic and social recovery of London and the UK.

 

6.16          Westminster’s economy – the majority of which sits within the West End – has an estimated contribution of £57bn GVA, with the West End’s retail district alone seeing (pre-pandemic) sales estimated at £9bn[32]. In 2019, London accounted for 55 per cent of all inbound visitor spend to the UK[33], with the shopping, leisure and tourism offer of the West End and Knightsbridge playing a significant role in the attractiveness of the capital to international visitors.

 

6.17          In places like the West End and Knightsbridge, which are important retail and leisure destinations for international visitors, the proposal could result in the loss of substantial amounts of commercial floorspace, in particular from the flagship stores that anchor the retail function of the area and contribute significantly to the vitality of central London. While it is recognised that these areas – including flagship stores – will continue the ongoing shift to more experiential and service-based commercial activities, the new PDR would have the opposite effect, potentially reducing the West End to a series of ground floor show rooms and high-end residential lobbies.

 

6.18          It is vital that the strategic contribution that the West End and other shopping, leisure and tourism destinations across the capital make to the economy, culture and identity of the capital is promoted and enhanced by supporting a balanced mix of commercial, cultural and residential uses. This requires careful management which is best undertaken collectively by the local planning authorities, the Mayor, Business Improvement Districts and other stakeholders. In contrast, the government’s new PDR would result in significant potential harm to the West End and other significant shopping, leisure and tourism destinations in London through uncoordinated piecemeal conversions from commercial uses in Class E to residential, undermining their vitality and viability, and their contribution to the economic and social recovery of London and the UK.

 

(d)   Impact on town centres and high streets

 

6.19          Town centres and high streets are at the heart of the community and central to the economic and social recovery from the impacts of the Covid-19 pandemic. At a time when people want to support their high streets and are more reliant on local services, it is vital that communities have the ability to decide how to plan their local area in the way that suits them best.

 

6.20          The new Class E to residential PDR will undermine the adaptation of town centres and high streets to become (or remain) vibrant, successful locations for a range of business, culture, civic and community activities complemented by well-planned housing and mixed-use development, delivered through the planning system. The proposals put at risk the social and economic functions of our high streets, town centres and the commercial heart of cities at the worst possible time.

 

6.21          The new PDR will result in a free for all, dependent on the financial interests of the individual property owner without any ability to reflect the collective (economic, social and environmental) interests of the community which are at the heart of sustainable development. Active commercial uses and the jobs they support will be at risk of simply being turned into higher value housing use. The introduction of piecemeal residential development on the ground floor will risk creating sterile and incoherent high street frontages, impacting negatively on their sense of place and weakening their attractiveness as places to visit, work and interact. The piecemeal loss of commercial will change footfall patterns for example, depriving other businesses and potentially driving the loss of a far more significant number of premises that those who chose to convert commercial to residential. A vicious cycle would then be set in train.

 

6.22          London’s high streets and town centres will need to continue to adapt as a result of the Covid-19 pandemic, but how this should best be achieved will vary from place to place. Instead of national, one-sized-fits-all PDR, the government should be pushing for robust commercial planning instead. Once a commercial unit has been converted to residential it is lost permanently. As such, PDR inhibits the wider recovery and regeneration of town centres. Night-time economy and food & beverage uses will be shut out entirely and therefore unable to contribute to recovery, culture or jobs.

In some town centres, if there is a surplus of retail space, there may be opportunities to revise town centre boundaries and identify new sites for housing delivery. Where local plans identify these locations, the transition can be managed to optimise high quality housing delivery – permitted development on the other hand encourages sub-optimal conversion schemes as set out in our response to Question 2.

 

6.23          In other places, repurposing stores as offices to meet demand for working closer to home may occur. In some places, a more targeted form of permitted development might be appropriate, where supported by the borough. The new PDR however, will undermine the potential for high streets to recover. They could become pepper-potted with commercial premises spread thinly over a wide area, with no cohesive centre or sense of vitality. Small customer-facing businesses such as solicitors and recruitment agencies who occupy upper floors could lose their premises. The shops and services that people rely on for everyday items could disappear and high streets could lose their function as places that bring people together, exacerbating issues of loneliness, anxiety and poor mental health – issues that have been worsened by the isolation created as a result of the Covid-19 pandemic.

 

6.24          Footfall for town centres and high streets is drawn from wide catchment areas. The marginal ‘benefit’ to footfall derived from a single additional housing unit at ground floor level will never outweigh the negative impacts including the disruption of businesses and jobs, the loss of space to allow new businesses to start-up and innovate, and the creation of a sterile rather than active high street frontage, unless the commercial space is genuinely surplus to requirements. But there are no criteria in the government’s proposals to take account of whether the commercial space is genuinely surplus or conversely whether the loss of the space could impact on the sustainability of the town centre or high street to provide access to goods and services, including for vulnerable groups. Local services could disappear or become more dispersed via PDR, undermining the aims around accessible services (such as the 15-minute city concept for example) and zero carbon ambitions. This will have a particular impact on lower income families who are less likely to have access to a car.

 

6.25          In London, the planning system has been delivering sustainable development and responding to the needs of the market – both commercial and housing – by ensuring sufficient space for commercial uses in town centres and high streets whilst delivering high quality, housing and mixed use development. Almost 30 per cent of London’s housing capacity on large sites is located within or on the edge of a town centre – providing capacity for 197,000 homes over the first 10 years of the new London Plan.

 

6.26          By allowing uses in Class E to change to residential through permitted development, the new PDR does not respond to the needs of the commercial market and ensure that there is sufficient space in sustainable locations for business to grow and thrive. The matters for consideration in prior approval set out in the new legislation do not address key aspects concerning the impact of the change of use on the provision of services within Use Class E and impacts on the sustainability of town centres, high streets and other strategically important business locations.

 

  1. What is the impact of PDR on the involvement of local communities in the planning process?

 

7.1              Nationally imposed PDRs erode the involvement of local neighbourhoods and communities in the development of their areas. The 2021 London Plan supports strong and inclusive communities and encourages early and inclusive engagement with stakeholders, including local communities, in the development of proposals, policies and area-based strategies[34].

 

7.2              By contrast, national top-down PDR removes the ability of local communities to shape their areas in ways which support Good Growth that is socially and economically inclusive and environmentally sustainable. The approach to PDR also runs counter to the aspiration in the Planning White Paper to give neighbourhoods and communities an earlier and more meaningful voice in the future of their area as plans are made.

 

7.3              As a result communities may lose confidence in the planning system and become more resistant to development as they experience the negative impacts of individual conversions through PDR and the cumulative negative impacts of widespread conversions (see our response to Question 5 above).

 

  1. Should the government reform PDR? If so, how?

 

8.1              Government should reform permitted development rights and devolve permitted development powers to Mayoral authorities including the Mayor of London so that more nuanced and place-specific PDR can be drawn up, in collaboration with local authorities and other stakeholders. This could be done through excluding Greater London and other relevant areas from the national Permitted Development rights and minor amendments to the Infrastructure Act 2015 (which allows the creation of Mayoral Development Orders but is overly restrictive in its current form). This is essential to deliver Good Growth in London and ensure that the unintended negative impacts of nationally-imposed PDR are avoided.

 

8.2              For other areas, consideration should be given to whether local or even neighbourhood permitted development rights should be promoted. However, it is noted that there is already provision for these within the planning system and there is a relatively poor take up because of the harmful impacts as set out below. Ultimately the absence of PDR does not mean these proposals don’t happen: simply that they need to comply with other planning policies within the statutory development plan for the area.

 

  1. Other matters relevant to the government’s approach towards these kinds of permitted development.

Equalities impacts

9.1              By not making appropriate provision towards affordable housing, the government’s new Class E to C3 permitted development would impact negatively on several groups who share a protected characteristic. High housing costs in London affect private and social renters more than owner occupiers and low quality-housing is more common in the private rented sector. Social renting is more prevalent among Black and Bangladeshi Londoners than other ethnicities and private renting is relatively more widespread among non-British/white Irish Londoners, and people from the other Asian and other ethnic groups. Younger, lower-income and disabled Londoners, as well as recent migrants to London, are more likely to be renting. Many groups face distinctive challenges around housing, including disabled Londoners, migrants, refugees and asylum seekers, gypsies and Irish travellers and older BAME and LGBT Londoners[35].

 

9.2              Groups under-represented in London’s workforce include older Londoners, mothers, young black men, Pakistani and Bangladeshi women, and disabled Londoners. In London, women are less likely to be self-employed than men, facing barriers to entrepreneurship[36]. By giving rise to negative impacts on London’s businesses, jobs, people’s livelihoods and the availability of commercial space to support new business start-ups and entrepreneurial activity, the government’s new PDR could impact negatively on the groups identified above to secure employment opportunities.

 

9.3              Research for the GLA[37] has highlighted the importance of high streets (and the mix of commercial, business and service uses that they contain), for vulnerable groups including those with protected characteristics. High streets offer local and accessible economic opportunities including employment for marginalised Londoners as much as for highly skilled people seeking full-time employment. High streets are important gathering spaces for marginalised and underrepresented groups. Visitors to high streets include a significant proportion of job-seekers, elderly people, young people and recent immigrants. The study reported that 51 per cent of visitors to high streets are not in employment, compared with 27 per cent across London. High streets provide crucial social infrastructure and social services for Londoners. Both social infrastructure and shops often go beyond their formal role by offering various forms of support and care to high street users. Almost 40 per cent of small businesses interviewed performed some kind of social function. The government’s new PDR will impact negatively on these uses and the vulnerable groups who depend on them.

 

9.4              The loss of social infrastructure services that fall within Use Class E including medical or health services (including GPs’ surgeries), creches, day nurseries or day centres will have a negative impact on all Londoners but is likely to disproportionately affect disabled Londoners, children and older Londoners, people who are pregnant, new parents, and Londoners on lower incomes. Women – who are disproportionately responsible for childcare, caring responsibilities for adult relatives and shopping for daily essentials[38] – are also more likely to see more disruption than men from the new PDR.

 

9.5              If PD impacts on local authorities’ ability to secure sustainable outcomes around transport, there could be resultant implications for air quality and congestion which impact disproportionately on lower income households, including Londoners with protected characteristics.

 

9.6              It is also important to note, those with protected characteristics (discussed above) that will be disproportionately negatively impacted by the loss of high street amenity, will also not benefit from any imagined upside from PDR relating to housing delivery. Homes that are built under PDR will likely be of insufficient quality, size, or level of affordability for those whose needs cannot be met by market homes.

 

9.7              The Government’s new PDR should be subject to a full Equalities Impact Assessment.

 


Appendix 1 Office to residential PDR prior approval data for London

Table 1 Office Floorspace affected (sq.m.) - All approvals, Financial Year (FY) 2013-19

Source: London Development Database


Table 2 Office Floorspace affected (sq.m.) Completions, Financial Year (FY) 2013-19

Source: London Development Database

 

May 2021


[1] Assessing the impacts of extending permitted development rights to office-to-residential change of use in England, RICS, 2018

[2] London Assembly Planning Committee - permitted development rights, April 2020

[3] Three Dragons et al. London Plan Viability Study, GLA 2017

[4] Mayor of London, Strategic evidence to support London borough Article 4 Directions in London’s nationally significant office locations, February 2018

[5] Living with beauty: report of the Building Better, Building Beautiful Commission (publishing.service.gov.uk)

[6] https://www.london.gov.uk/sites/default/files/2017_london_shma_with_addendum_and_updated_summary.pdf

[7] Bank of England Staff Working Paper No. 837

[8] Letwin_review_web_version.pdf (publishing.service.gov.uk)

[9] House price to workplace-based earnings ratio - Office for National Statistics (ons.gov.uk)

[10] Section 1 (publishing.service.gov.uk)

[11] Source: GLA analysis of London Development Database and VOA data.

[12] Large parts of the CAZ boroughs were granted exemptions from office to residential PDR when the rights were first introduced in 2013. These boroughs introduced Article 4 Directions to remove the permitted development rights when the exemptions expired in May 2019.

[13] Source: GLA. Based on an average of 58 sq.m per dwelling which was the average dwelling size delivered in office to residential PDR in London in conversions of 1,500 sq.m or less, over the period 2013-2020.

[14] Source: GLA calculations taking into account average market values

[15] mayor_of_london_consultation_response_-_planning_for_the_future_-_29_oct_2020.pdf

[16] Office to residential PDR was first introduced by government in 2013

[17] London Development Database, GLA analysis 2021. This is based on a 25 per cent sample of sites in the LDD where the occupancy status was known

[18] The calculations of impact 2013-2020 are based on areas outside the CAZ because these areas did not benefit from the exemptions to PDR from the outset in 2013. Whilst some areas outside of the CAZ boroughs did benefit from Article 4 Directions to remove PDR, a significant amount of prior approvals had been granted prior to the Article 4 Directions being put in place.

[19] Source: London Development Database and GLA analysis

[20] Specified in the legislation for new Class E to residential PDR

[21] London Office Policy Review, Ramidus Consulting, 2017

[22] GLA Economics, The Evidence Base for London’s Local Industrial Strategy – Final report, February 2020

[23] Ramidus Consulting. London Office Policy Review, June 2017

[24] Valuation Office Agency. Non-domestic rating: stock of properties including business floorspace, 2020

[25] Valuation Office Agency, 2020 op cit and GLA analysis

[26] GLA Economics. Working Paper 68: Work and life in the Central Activities Zone, the Northern Isle of Dogs and their fringes, GLA 2015; Mayor of London, Strategic evidence to support London borough Article 4 Directions in London’s nationally significant office locations, February 2018;

[27] Mayor of London, Strategic evidence to support London borough Article 4 Directions in London’s nationally significant office locations, February 2018

[28] The economic future of the Central Activities Zone (CAZ), Arup/Gerald Eve/LSE, 2021

[29] In England and Wales, seven of the top ten local authorities with the highest median house prices are wholly or partly within the Central Activities Zone (CAZ). All boroughs that are wholly or partly within the CAZ are in the top 17 local authorities with the highest median house prices.

https://www.ons.gov.uk/peoplepopulationandcommunity/housing/datasets/medianhousepricefornationalandsubnationalgeographiesquarterlyrollingyearhpssadataset09

[30] This is explored further in the 2018 GLA paper “Strategic evidence to support London borough Article 4 Directions in London’s nationally significant office locations”: https://www.london.gov.uk/sites/default/files/strategic_evidence_to_support_london_nationally_significant_office_locations_final.pdf

[31] See Mayor of London, Strategic evidence to support London borough Article 4 Directions in London’s nationally significant office locations, February 2018

[32] West End Good Growth: Identifying future growth scenarios for Oxford Street and the West End, 2018: https://www.london.gov.uk/sites/default/files/20181129_gla_wcc_wegg_arup_final_report_released.pdf

[33] Visit Britain: https://www.visitbritain.org/visitor-economy-facts

[34] The London Plan 2021, Mayor of London, 2021 (GG1 Building strong and inclusive communities)

[35] Equality, Diversity and Inclusion Evidence Base for London, GLA, 2019

[36] Equality, Diversity and Inclusion Evidence Base for London, GLA, 2019

[37] Mayor of London. High Streets for All. December 2017

[38] GLA Intelligence, Equality, diversity and inclusion evidence base for London, June 2019: https://data.london.gov.uk/dataset/equality--diversity-and-inclusion-evidence-base