Thousands of Britain's offices sit empty while thousands of homeless Britons sit on the streets. A proposed solution is to turn those offices into housing. A report from property agency CBRE (US:CBRE) made headlines last week after it claimed 28,000 homes could be delivered if all of London’s currently vacant second-hand stock was converted into housing. It is a compelling argument, but it is riddled with problems.
For a start, this is not a new idea. The government expanded permitted development rights (PDR) to allow offices to be turned into housing in 2013. I live in Croydon where plenty of homes for rent and sale have been delivered this way.
On the one hand, more homes are generally a good thing. On the other hand, the living conditions in many of these homes are appalling because, under PDR, developers do not need to achieve full planning permission, allowing them to cut corners and build scores of cramped flats without ventilation or even windows.
Local politicians, campaigners, and academics who witnessed the rise of PDR flats during its heyday between 2015 and 2020 described them as “rabbit hutches” and “the slums of the future”. Since then, many councils, such as Croydon, have introduced legislation to restrict or ban PDR.
Developers are not all that keen on it, either – at least not the major players. When the government expanded PDR to allow high street shops to be converted into homes in 2021, the British Property Federation (BPF), whose members include Land Securities (LAND), Unite (UTG), British Land (BLND), Shaftesbury Capital (SHC), Hammerson (HMSO), Derwent London (DLN) and most other large property companies, vocally opposed the idea. “Worryingly, while there are many examples of high-quality PDR homes, there is growing evidence of, and media attention on, poor-quality PDR homes, eroding trust in developers,” it said.
It is also difficult. Put simply, offices are not designed in the same way blocks of flats are. Changing that can sometimes be more effort than it is worth. Most PDR developments happen in and around London. Beyond the capital, the potential return for overcoming PDR's challenges are small.
The lack of developer enthusiasm, combined with the rise in interest rates and councils’ opposition to it, has led to a gradual decline in PDR schemes since 2015. Even those developers who initially liked the idea say that the buildings which were ‘easiest’ to convert have already been done. What is left is stock which is even less suitable for housing than what has already been delivered and heavily criticised.
Despite all this, CBRE’s report suggests that a new wave of office-to-residential PDR could be generated by the rise in empty offices created by the post-Covid-19 hybrid working causing tenants to leave. There are some reasons why PDR 2.0 could work. After all, the empty offices CBRE is pointing to are largely high-quality buildings in the centre of London. Croydon’s conversion of unwanted 1960s office stock to housing produced terrible results, but it is easier to imagine some decent housing being built in Canary Wharf in a former Grade-A office building.
However, even if all of the obstacles for PDR could be overcome, the results seem hardly worth it. The 28,000 homes CBRE says could be delivered would represent just 0.65 per cent of 4.3mn homes think-tank Centre for Cities says are needed to plug the housing deficit. It would certainly move the needle. But, considering all of the other problems thrown up by converting homes into offices, we should question any hype around the idea.
