Research from Excellion Capital found that property investors could benefit from using permitted development rights (PDRs) to convert non-residential buildings into homes without complex planning permission.
The Labour Government aims to deliver 1.5 million new homes by 2029, which requires more than 300,000 homes annually.
Excellion Capital’s analysis shows that new-build deliveries are declining, with only 198,612 homes built last year, down 6.5% from the previous year and well below pre-Covid levels.
To meet these housing goals, Labour may need to consider alternative strategies, such as material change of use, which allows for changing a building’s designated purpose.
However, while 21,591 non-residential properties were converted to homes last year, this was a 3.1% drop from the previous year.
Yorkshire & Humber saw a 70.4% rise in such conversions, with increases also noted in the East Midlands and East of England.
Excellion Capital’s analysis revealed that 12,375 homes were created through PDRs in 2019-20.
This number fell during Covid-19 but recovered slightly in 2021-22.
Last year, however, it dropped again to just 8,825, marking an 8.3% decline.
Robert Sadler, vice president of real estate at Excellion Capital, said: “PDRs provide a great way for property owners and investors to convert struggling assets into new homes without the need to secure planning permission.
“This makes for an extremely fast project turnaround time, which can be highly attractive to lenders who often see PDRs as a low-risk venture with fast returns.
“As the Government pushes to meet its heady new home delivery targets over the next five years, PDRs could play a central role, especially in those places where land and space is limited.”
Sadler added: “There is also currently tremendous availability of relatively low priced debt for residential projects, which means, in the right hands, there are some incredible opportunities just waiting to be unearthed with PDRs.
“It is strange, therefore, that the number of instances where PDRs are being used to create new homes has fallen over the past year.
“A recent survey of ours reveals that high interest rates were the most pressing concern among property investors in the UK, so perhaps the falling number of PDR instances is because high interest rates required lower leverage and ultimately meaning more equity was required.”
He said: “But now that interest rates are trending downwards, a previously high interest environment shouldn’t be enough to put investors off taking advantage of great opportunities when they arise.
“And that’s where we at Excellion Capital come in – by recourse to our strong lender relationships, we always know the best priced debt at the right leverage, for these projects.”
