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Creative solutions needed for housing crisis

The UK property crisis continues to persist amid rising mortgage rates and the cost-of-living crisis, with crucial targets not being met.

By Ravi Pankhania 

The Government’s target of 300,000 new homes has fallen short by over 40,000.

A fresh approach is needed to tackle the issue of getting people into homes, and being more creative in terms of how buildings are redeveloped is a good starting point. In May this year, sustainable impact investor Bridges Fund Management, alongside developer HUB acquired 45 Beech Street on the edge of London’s iconic Barbican Estate, with plans to refurbish the previously commercial building into residential housing.

Projects such as these are key to addressing some of the fundamental issues that are holding back residential housing solutions – namely the lack of initiatives to make use of empty properties and the difficulties of converting excess office space into residential, both problems that are exacerbated by an outdated planning system.

Repurposing  empty properties a priority

According to the national charity Action on Empty Homes, there are over one million empty homes in England alone, with over 500,000 of those long-term empty properties or unused second homes. London is one of the worst affected cities, with an estimated 30,000 long-term empty homes across the Capital, worth around £20bn. The north-east bears the highest amount of long-term empty properties as a proportion of their total dwelling stock. For every 100 properties, more than 1.4 sit unoccupied.

From 2012 to 2015, the Coalition Government’s Empty Homes Programme reduced the number of empty properties by over 20%, and we need a revival of this initiative. Modelling by national charity Crisis, shows that a concerted effort to repurpose long-term empty properties could provide up to 40,000 genuinely affordable homes for people in need over the next four years.

Of the long-term empty properties, some 7,000 are commercial and business premises. It is estimated that these spaces have the potential to create some 3,500 residential units through the conversion of empty retail space and over 16,000 residential units through the conversion of vacant office space.

Converting excess office space

Hybrid working is here to stay, and offices are emptier than ever before. Businesses are feeling the pinch, with roughly half of large multinationals planning to cut office space in the next three years.

JLL this year found that across the top 35 European cities, there was 250 million square feet of vacant office space, with scope for developing 43,000 flats in London alone. Planning restrictions on these conversions in the UK were lifted in 2015, which saw a boom of 17,751 conversions from 2016-2017. However, numbers have dwindled in recent years due to the pandemic and ongoing funding issues plaguing SME property developers. The rise of direct property lending from private debts funds and, often online, alternative property lenders is helping to address this issue, but mainstream banks need to also return to the sector.

As businesses continue to downsize, and with planning permission on the conversion of office-to-residential becoming more acceptable, developers should seize the opportunity to take on such projects and help alleviate the housing pressures that exist across the country.

Much needed planning reform

The UK housing planning system is not only outdated, but also overworked and underfunded, which is constraining developers in their efforts to build and come up with new approaches.

In September 2023, the Building the Future Commission reviewed the UK’s planning system, concluding it was under ‘substantial strain’.  Only 15% of major decisions were being made within the 13-week deadline, and the number of homes being granted permission has fallen annually for the fourth consecutive year. Developers are not the only ones affected; planning departments are overwhelmed due to a drop in funding of 60% per capita over the past decade.

The central issue is that the planning system has remained fundamentally unchanged since 1947. We need to move away from the discretionary case-by-case system towards a more flexible zoning system. This ‘relaxing of the rules’ will help alleviate the stress currently experienced by both developers and planning departments, which in turn should ensure that the homes that this country needs will be delivered.

While creativity on its own will not solve the UK housing crisis, diversifying the way in which we approach the issue is critical. Planning reform lies at the heart of this issue, and while it may be a long road to achieving the necessary change, the journey will be worth it.