While the Government used November’s Budget to reaffirm its commitment to ambitious housebuilding targets and planning reform, the Office for Budget Responsibility (OBR) has cast doubt on how quickly this ambition will turn into delivery.
In its outlook, the OBR noted that the impact of the March 2025 residential planning reforms is yet to materialise and that most of the increase in housebuilding is expected to take place from 2027 to 2028.
It also highlighted potential downside risks such as additional environmental safeguards and economic conditions, including a shortage of viable sites in some parts of the country, which may limit the release of land for development.
The policy intent may be clear, but as has been proven over many years, the road to reaching those targets can be slow and complicated. So, it’s important that we also consider more immediate and practical ways of increasing the UK’s housing stock, and one of the most effective solutions is the conversion of existing buildings into residential properties.
Government ambitions to deliver 1.5 million homes over five years are steep, and new-build developments alone are unlikely to be enough. However, new homes don’t have to mean new builds. Across the country, there are countless underutilised assets with potential to be transformed into much-needed housing.
According to housing charity Crisis, there are currently over 998,000 empty homes in England, a figure which has been steadily rising over the last five years. Of these homes, 265,061 are classed as ‘long-term vacant’, meaning they’ve been empty for more than six months. And this is before you consider the estimated 170,000 empty commercial properties that could also be converted for residential use.
The expansion of Permitted Development Rights in recent years has made this strategy even more accessible. For example, developers can now convert up to 10 residential units from an agricultural building without the need for planning permission, doubling the previous limit. With further reforms expected the conversion opportunity looks only set to grow.
For property investors, conversions can be more cost-effective and environmentally sustainable than ground-up developments. Projects can often be delivered faster and with fewer planning constraints, allowing investors to bring homes to market more quickly. From a financial perspective, it can also be more straightforward to secure funding for conversion than for development. Even for extensive works, bridging finance tends to be cheaper and more accessible than full development finance.
At Castle Trust Bank, one of our most popular initiatives of recent years has been the introduction of our Heavy Refurb with Drawdowns product, which enables borrowers to draw down funds in stages and only pay interest on the amount they’ve used. This means they can reduce borrowing costs and align funding more closely with project timelines.
Investors and developers of all sizes will be critical in delivering new stock, and the path of least resistance may well lie in repurposing what already exists.
For brokers, this represents an opportunity to support clients in accessing the finance they need to act quickly and capitalise on these opportunities. With the right lender and the right structure in place, conversions can offer a practical and profitable solution to a national challenge.
Anna Lewis is commercial director at Castle Trust Bank
