The number of homes created through conversion projects has fallen by 22% in the last five years, according to analysis by Octane Capital, raising concerns that the Government’s housing delivery targets are increasingly out of reach.
The lender reviewed official Government figures on net housing supply and found that 114,961 homes were delivered through change of use in the past five years, compared with 147,458 in the previous five-year period.
The decline has been felt across all regions, with the North East seeing the steepest fall of -52.6%, while London was down -49.7%.
The East Midlands (-26.3%) and East of England (-23.5%) also recorded notable drops, with the West Midlands showing only a marginal decline of -1.3%.
Octane Capital said developers have faced more restrictive planning requirements, higher build costs, and tighter lending criteria from mainstream banks, all of which have limited the number of straightforward office-to-residential conversions seen in previous years.
Rising interest rates and supply chain pressures have further reduced the financial viability of schemes.
Jonathan Samuels, CEO of Octane Capital, said: “The Government has set itself some very ambitious housing targets, but the reality is that these will never be achieved through new-build delivery alone.
“Change of use is one of the most effective ways of bridging the supply gap, yet delivery has been in decline.
“A lack of funding, stricter planning, and rising costs are all standing in the way. However, the specialist finance sector is helping to combat this trend by giving developers the speed and flexibility to secure sites, fund conversions, and bring much-needed homes to market.
“At Octane Capital, we’re committed to supporting projects that make a meaningful difference to supply, particularly in a climate where mainstream funding routes are often limited.”
Octane Capital highlighted that bridging loans, refurbishment finance and development exit facilities are playing a key role in enabling developers to adapt funding, release equity and act quickly on opportunities despite a more challenging market backdrop.
