Game of Loans: When permitted development isn’t permitted
In terms of providing much needed housing stock, I think it’s fair to say that permitted development (PD) has been a reasonable success.
We can argue long into the night about the subsequent effects on office space in certain areas but, in truth, the increase in housing that PD has allowed has provided some relief to the huge demand we have around this country.
Without going too far into the nauseating jargon surrounding the legislation itself, as a lender we have seen several examples where PD isn’t as clear cut as the developer may have first thought. Some councils have been made entirely exempt from having to allow PDs to take place, such as those in central London, central Manchester and, for some obscure reason, large chunks of Ashford. Others seem to have been given carte blanche on whether PD can be allowed at all, which has created a lot of ambiguity.
Last October, Brandon Lewis announced an extension to the original PD deadline of May this year and the legislation surrounding this is expected in April 2016. Up until then there was even more uncertainty about what would happen to schemes that weren’t finished or even tenanted by the time the May 30th deadline rolled around. Whilst turning up the pressure on developers by giving them a deadline may have proved popular amongst the general public, from a lender’s perspective, this was far from ideal and the relief provided by the extension was much welcomed.
It has also been mooted that PD may be extended to cover conversion projects from brownfield sites or those with light industrial use, but again, in this instance, the bulk of the understanding around the ins and outs of PD seem to be based more on speculation and varying interpretations rather than concrete facts.
We at Regentsmead recently attended separate consultations with the Department for Communities and Local Governments as well as the Department for Business, Innovations & Skills to discuss various new ideas to ease the demand for housing in the UK. Some of the topics covered included a complete overhaul of the planning process and whilst some of the ideas suggested were naively unrealistic, I don’t think a full-on refurbishment of the current system would be a bad idea.
One of the more interesting parts of the discussions was the seemingly autonomous ways councils allowed planning to be either passed or denied with little consideration for the bigger picture. As a very good client of mine based in Essex recently found out, in some areas NIMBYs seem to be very dominant in blocking some really strong development schemes, whereas in other areas local councils may be driven or incentivised in other ways. One of the conditions of the new extended rights is the power for a local authority to consider the impact of noise on the intended occupants of new PDs which, in my opinion, will create more ambiguity.
The success of the PD programme is arguably embedded in how little certainty there is around it. The fact that the wording surrounding PD is very ambiguous has allowed for some very successful and profitable schemes; however it could one day catch a lot of developers out. This could in turn lead to some drastic issues for the more garish lenders out there.