Turn closed stores into homes? It will be the developers who will benefit from the good deals | Rowan moore
Land owners of Great Britain, rejoice! Your government has not forgotten you. Magnanimous and generous as she is, she has devoted the vast public resources at her disposal to a noble cause, that of valuing the property you own. Planning is relaxed, taxes reduced and subsidies introduced, all with the effect of increasing the already high prices of land and buildings in this country.
The government does not say it like that. Its departments and ministers say that “we can help the high street to adapt and prosper for the future” or that its policies “will help to support the creation of essential housing” or that first-time buyers will have a better chance of living. ‘get on the property ladder. But the most certain effect is that windfall gains often appear on the balance sheets of those who already own.
Take, for example, the policy that stores can be turned into homes without a building permit, which went into effect in April. As has been widely pointed out, this will likely have the effect of accelerating rather than reversing the decline of main streets, as owners push viable businesses for no other reason than the fact that they can make more money by transforming their premises in houses.
What was once an active shop window, with entrances and exits all day long, becomes a domestic front door, which contributes less to the liveliness of the neighborhood. Past recessions have allowed new businesses to flourish, taking advantage of low rents to revive Mainstreets – market cycles, to put it another way, periodically reduce landlord wealth in favor of tenants and the liveliness of Mainstreet. The retail conversion rules out this possibility forever.
There are, of course, redundant retail buildings that can be beneficially converted into homes, but it does require some planning to determine where this is best done and planning is what the new policy rules out. It also removes the possibility of what is called a planning gain, achieved through instruments such as Article 106 agreements or the Community Infrastructure Levy (CIL), which is the capacity of local authorities. require contributions to things like affordable housing as a condition of planning. authorization.
We’ve been here before, with the eight-year-old policy of turning offices into homes without planning consent. The effects, in terms of the quality of the housing created, have been largely disastrous. As with the new retail policy, the opportunity to gain in planning was removed, so office building owners who benefited from the policy sometimes saw their values double. “Retail”, say real estate consultants Lambert Smith Hampton with regard to the new policy, “could offer a much greater potential for change of use towards residential in the coming years than offices”. They also say that “the scale of opportunities is, potentially, huge”, that the lack of Section 106 requirements is “a specific pull factor” and that “seeking change in use through this route can support developers’ profit margins and improve system viability ”. .
It is in fact a large donation of public goods. Since the Land and City Planning Act of 1947, land development rights – as opposed to land itself – are in fact public property. When the building permit is granted, a defined part of these rights and whatever value that derives from them is transferred to the landowner. This principle gives local authorities leverage to demand public benefits and to plan development. If those rights are simply ceded, as is the case with retail to residential conversions, value and leverage go hand in hand.
Meanwhile, the government has used public finances on a number of programs intended to help first-time buyers and others desperate for housing that meets their needs. The Purchase Assistance Program, launched in 2013, allows buyers to borrow money from the government on favorable terms. Last summer, as part of its response to the pandemic, the Treasury reduced the stamp duty you have to pay when you buy a home. This reduction is temporary and should be removed later this year.
Both measures could be useful in reviving stagnant real estate markets, but where demand is high, they have the effect of pushing up house prices, thus negating any benefits they might have provided to buyers. One of the side effects of the purchase aid was to increase the profits of homebuilding giants such as Persimmon, which contributed to the £ 75million bonus that its managing director, Jeff Fairburn, took taken in 2017, having first been offered over £ 100million. Buyers report that developers are using purchase assistance to increase the value of their apartment. Meanwhile, the price of an average home has increased by £ 24,000 within 12 months from March 2020, despite the economic contraction of the lockout, largely boosted by the stamp duty holiday.
Other winning owners will likely be created by the government’s overhaul of the planning system, laid out in a white paper last year, which featured prominently in the Queen’s recent speech. Areas of the country will be zoned for “growth,” with automatic building permits, which again is likely to increase values. Here, at least, it is planned to capture part of this value for public benefits, by replacing article 106 and the CIL with a new levy. There are still too few details to know how it will work. We can only hope that the government will reverse its own tendencies and ensure that it benefits the poor with property versus those who already have enough.