Rules on office-flat conversion to ease

©Bloomberg

Developers will be able to convert office buildings into blocks of flats without asking councils for permission under radical changes to the English planning system designed to speed up the delivery of new homes.

The plan’s aim is to increase the UK’s housing supply at a time when building figures are approaching a historic low. Because of the supply shortage and banks’ reluctance to lend, the average age of unassisted first-time buyers is now at an all-time high of 33, according to data from the Council of Mortgage Lenders.

But the City of London, which fought a vigorous rearguard action against the proposals, will be promised an exemption from the change when it is announced within days.

Prime Minister David Cameron first raised the idea of liberalising the planning system two years ago, by freeing up “change of use” rules governing whether buildings have to be industrial, residential, retail or offices.

The Financial Times has learnt that planning minister Nick Boles will announce a new “permitted development right”, whereby many offices can be turned into residential properties without any permission. The changes will not, however, apply to shops or warehouses.

Ministers believe that with vacancy rates in the office sector running as high as 21 per cent in some regions, there is a case for changing empty office buildings into homes.

The rule change is likely to trigger a wave of conversions in central London, where residential property values have soared during the past five years. In London’s West End, average residential values of £3,000 per sq ft compare to £2,375 for office space.

Under the existing system, getting permission to convert an office development to residential use can be cumbersome and cost millions of pounds in legal fees.

Charles Fairhurst, chief executive of Fairbridge Residential Investment Management, said many office blocks were ripe for conversion: “If you walk around Fitzrovia you quickly realise there are an awful lot of less attractive office buildings which would do better as residential.”

The City of London successfully resisted the changes, arguing they would be irreversible after landmark buildings had been converted into residences. City authorities feared it would be impossible to unpick hundreds of long-term residential leases, many running to a century or longer, when the financial services market picked up and office demand soared.

“We’ve just had a once-in-a-lifetime financial crisis so it’s hard to judge what the demand will be for office space in the coming years,” said Mark Field, MP for the Cities of London and Westminster. “I’ve made representations on behalf of the Square Mile for an exemption so I am delighted by this sensible move.”