Housing and Planning Bill

Lord O'Shaughnessy Excerpts

Wednesday 20th April 2016 Lords Chamber

[Lord O'Shaughnessy (Con)]

My Lords, unfortunately I want to express my concern about these amendments and, in doing so, for the second day in a row on Report will no doubt fail to ingratiate myself with a local authority leader who is a noble friend.

I declare an interest in that I was one of the architects of this policy when I was director of policy for David Cameron in my time at No. 10, so noble Lords will understand that I might be a bit defensive about it.

We had presaged the permitted development policy in the 2010 manifesto, explaining that we would amend the use class orders as part of our plan to deliver more housing. That policy, like so many ideas in the manifesto, was based on the principle of devolution, but a richer view of devolution than is assumed by some, who think that this means only pushing power down to local authorities. To quote directly from the manifesto:

“So we want to pass power down to people—to individuals where we can”.

The permitted development rights brought in initially by the coalition Government are, to me, a classic example of that principle in practice: devolving power to individuals and organisations—in this case, building owners—to use their private property as they see fit and in response to changing market conditions. This kind of transfer of power, which the former Labour Cabinet Minister, David Miliband, once called “double devolution”, is what these amendments would curtail.

Therefore, the underlying principle at stake here is devolution, but it was put to work to solve a very pressing problem, which the noble Lord, Lord Tope, has recognised and which everyone in this House recognises—a chronic shortfall in new-build homes. In 2010, as the coalition Government came to power, there were just over 100,000 housing completions, compared with an annual household formation rate of around 250,000. The housing vacancy rate was around 3%, and much of that was tied up in moves, probate and so on. At the same time, the high-street vacancy rate was 16.5% in 2010, and in the south-east—obviously one of the strongest regional economies—the office vacancy rate was 17%. I repeat: 17% against 3%. In 2010, over 260,000 offices of all shapes and sizes were vacant.

So there was, and indeed had been for many years, a clear imbalance between demand for residential versus office and retail uses. There were many causes for this: population growth and demographic change; changing working habits, such as increased home working; changing demands for office space, including different designs required for computer cabling and air conditioning; and changing shopping patterns, such as the rise of internet shopping. Whatever the reasons, it was clear that the old approach was not working and that change was required, and that was brought in by this policy.

The next question is: has this policy worked? Again, the unequivocal answer is yes. JLL Residential Research estimates that 8,000 prior approvals were secured in the first two years of the policy and that, if implemented, they would have created 60,000 homes. New homes created by change of use rose from 12,500 in 2013-14 to 20,650 in 2014-15. Critically, this has not impacted office development. Much of the talk in this debate has been about London, but in London construction levels for commercial reached a seven-year high in 2015. Therefore, it is not having the negative effect that some people have said.

Moreover, important protections are in place. They are being used and provide local flexibility. There are 33 exempt areas. Local authorities can use Article 4 directions—indeed more than 500 are in place—and any other enlargements or changes would clearly be subject to planning permission.

So it seems to me that the current policy, which would be made permanent in the Bill, provides the right balance between higher levels of development, more homes and more office space, and exemptions where necessary. Unfortunately, what these amendments would do is take us back to the status quo ante, when that imbalance was allowed to emerge. That would be a step backwards that would hinder a necessary and effective new part of the planning system. It would hinder the rights of landowners to respond to market conditions to provide the housing that we need. On that basis, I cannot support these amendments.

[Baroness Williams of Trafford]

My Lords, I thank the noble Lords who have spoken on both sides of the argument. My noble friend Lord True and the noble Lord, Lord Tope, spoke about safeguarding some of the economic well-being of their areas. My noble friend Lord O’Shaughnessy demonstrated that this has been deeply beneficial to areas such as mine in Trafford, revitalising our local high streets and bringing office buildings back into use where once they stood empty. My noble friend Lady Scott talked about inappropriate use of permitted development rights for things such as building houses in industrial estates. As my noble friend Lord O’Shaughnessy said, we have Article 4 to implement in places where it is simply not appropriate to move from office to residential use.

As I outlined in Committee, the office to residential PDR is making a very important contribution to delivering the 1 million homes that we want by 2021, while making the best use of brownfield sites and reducing the pressure to build on greenfield land. Take-up of the temporary permitted development right has been very high, with more than 6,500 applications since April 2014, demonstrating the demand for such conversions. This has led to over 5,300 permissions for office to residential conversions.

Our data show that in 2014-15 we saw a 65% increase in the number of new homes created through change of use, and the office to residential permitted development right will have helped to deliver around 8,000 new homes. Data from the sector also indicate that the temporary right has delivered much-needed new homes to buy or rent, including in London and the south-east, where we continue to face a housing shortage. The British Council for Offices has estimated that, nationally, 7,600 dwellings have been delivered since May 2013. Evidence to date shows that the light-touch planning process has resulted in new homes being brought forward. The British Council for Offices notes that some of the developments would be unlikely to have come forward via a planning application and are therefore additional to the number of homes that would otherwise have been delivered.

I will now address the new clause proposed in my noble friend Lord True’s Amendment 116A, and speak first to subsection (c). I understand that the aim behind it is to compensate business tenants where property owners exercise their permitted development rights to change use from office to residential. However, this is not a planning issue.

The amendment is unnecessary as there are already adequate protections for business tenants under the Landlord and Tenant Act 1954. Under the general law, business tenants have security of tenure until their lease expires. On expiration, the tenant has important rights under Part II of the Landlord and Tenant Act 1954 to have a new lease at the market rent, unless he has explicitly opted out of these rights at the beginning of the tenancy. Section 30 of the Act specifies certain circumstances in which the tenant is not entitled to a new tenancy. These include where the landlord is able to demonstrate an intention to undertake substantial works at the premises, which could be where approval is secured under the permitted development right. Under these circumstances, the tenant would be entitled to compensation from the landlord under Section 37 of the Act. The compensation is set at the rate of one times the rateable value of the premises, or twice the rateable value if the same business has been in occupation for more than 14 years.

I now turn to subsections (a) and (b). We consider that the introduction of the PDR for change of use from office to residential has resulted in new homes that would not have been brought forward under a planning permission. We consider that imposing such additional requirements on developers is likely to undermine the contribution the right makes to the delivery of new homes which are so badly needed.

In relation to subsection (a) of the proposed new clause, local authorities are already able to charge a fee for prior approval applications for change of use. The fee is set at a level which reflects the light-touch approach for processing these applications, as only certain specific issues require approval. I hope that this provides reassurance that appropriate safeguards are already in place and I invite my noble friend to withdraw the amendment.

On Amendment 116B, as I agreed in Committee, I have since met my noble friend Lord True and the noble Lord, Lord Tope, to discuss their concerns about the impact of the office-to-residential right. I have also listened carefully to the debates both in Committee and on Report on this issue and recognise the concerns expressed by my noble friend and the noble Lords, Lord Kennedy and Lord Kerslake, about the loss of office space in some areas and the impact that it can have on local businesses.

I appreciate the strength of feeling in certain areas on this matter, but I cannot accept the amendment that would introduce this new clause into the Bill. The issues raised relate to specific areas, as I have already outlined. The amendment would apply nationally and would create uncertainty within the market. It would undermine the important role that the right plays in the supply of new homes. It would also have a negative effect on the growth of the development industry. The amendment is also unnecessary, as appropriate protections are already in place to meet local conditions.

The office market continues to evolve to meet the business community’s needs and respond to the right. Where it is necessary to protect the economic well-being of a specific area, local authorities can bring forward an Article 4 direction to remove the right and allow for consideration of a planning application. That is a fair and proportionate approach. But I recognise that my noble friend Lord True also has concerns about Article 4 directions. However, the process is straightforward and provides robust safeguards by allowing for local consultation on the scope of the direction before it comes into force.

I hope that this reassures noble Lords that while we understand their concerns about the impact of the right in specific parts of the country, there are appropriate existing safeguards. But while the Government’s position on this issue will not change and while I urge my noble friend not to press his amendment, I will undertake if he wishes to have further discussions on this matter. As always, I am very happy to meet him.