Permitted Development Rights and Their Implications for Property Investors

Permitted Development Rights (PDRs) are constantly changing for the better, with the investment potential for strong residential conversions accelerating faster than ever.

Such changes have occurred as recently as December of 2021, in which the government announced that local businesses no longer require planning permission in order to put up tents and marquees – no longer as a temporary measure, but as a permanent option.

This kind of change in PDR rules highlights the value that PDRs can add to a property.

As pointed out by Kate Nicholls, CEO of UKHospitality, PDRs like this not only “provided a lifeline for some businesses during the pandemic,” but will “expedite future recovery and growth” for a huge variety of hospitality venues.

In effect, then, this latest advancement in the world of PDR highlights the potential for permitted development rights to add a significant amount of value to a given property with a minimum amount of fuss or bureaucracy – a combination which should draw the attention of any property developer or investor.

On a far bigger scale, PDRs can be used to add value to a property by transforming underperforming or defunct spaces into a prime residential property.

By paying particular attention to the beneficial changes to PDR rules in the last year or two, it’s easy to see how updated standards and new heights of quality are making this process more appealing, lucrative, and socially conscious than ever before.

As such, it’s worth taking a moment to reflect on how PDRs have changed over time, how they look today – and their promising implications for investors.

A brief definition

What are permitted development rights? The UK government’s definition is quite straightforward:

“Permitted development rights are a national grant of planning permission which allow certain building works and changes of use to be carried out without having to make a planning application.”

PDR is essentially a short-cut: a means of making changes to properties without the lengthy process of acquiring planning permission.

For businesses, as we’ve seen, this has great implications, as pubs and restaurants can expand their capacities and stay compliant with COVID-related restrictions.

For homeowners, too, this can be very helpful for various kinds of extensions and conversions, provided they’re built within certain parameters – rear extensions must use similar building materials to the house as it stands, for example.

Perhaps the most exciting implication for investors, however, is that PDR also encompasses large-scale developments in meaningful and potentially lucrative ways.

As of August 2021, the government solidified in law the notion of Class MA (Mercantile to Abode) – which, as the name suggests, allows developers to convert Class E properties (which include retail, office, and certain industrial units, among others) into residential properties.

This is a huge opportunity for investors and entrepreneurs alike.

Investment opportunities

Of course, for those who may have played closer attention to PDRs during their 2015 revamp, this latest development might be tinged with caution: after all, shortcuts to changing the use of buildings does come hand-in-hand with the possibility for a minority of bad developers to produce sub-par housing.

Today, however, this kind of concern is a thing of the past: according to the House of Commons Library, all office to residential conversions granted by PDRs require “adequate natural light in all habitable rooms,” while April 2021 brought with it the assurance that all PDR projects or schemes must comply with national standards in terms of space.

This means that investors and developers are now able to produce quality housing in prime regions which aren’t currently living up to their full potential, snatching lucrative possibilities from the jaws of stagnation.

Another key advantage of this application of PDR is that its aims are firmly aligned, not only with development and investment opportunities, but with attempts to resolve the UK’s housing crisis.

A parliamentary publication from July cites data from Policy Exchange which found that PDR “has created tens of thousands of new homes, especially in areas like London where the UK’s housing shortage is most acute” – and that the new Class MA rules are likely to increase PDR’s contribution still further.

A win-win situation

As PDR rules continue to grow and develop, convenience and opportunity are meeting increasingly high standards of quality, with new conversions breathing fresh life into areas which are not only prime residential locations, but which benefit immeasurably from an increased housing stock.

As such, investors will find it advantageous to keep their ears to the ground for the conversion-based opportunities which are sure to continue emerging in the property space.