The number of UK homes created through commercial-to-residential conversions has dropped sharply, raising red flags for landlords worried about future rental stock and investment opportunities. New analysis by specialist lender Octane Capital shows just 114,961 homes were delivered via change of use in the past five years—a 22% fall compared with the previous five-year period.
Conversions slump across the regions
Every region has felt the pinch. The North East saw completions plunge by more than half (-52.6%), while London recorded an almost 50% decline (-49.7%). Even areas once resilient to slowdowns, such as the West Midlands, slipped by 1.3%. Octane chief executive Jonathan Samuels warned that “the Government’s ambitious housing targets will never be achieved through new-build delivery alone,” stressing the vital role of conversions in bridging the supply gap.
Planning, finance and rates squeeze developers
Developers cite tighter planning rules on permitted development, rising construction costs and higher interest rates as key obstacles. Stricter lending criteria from mainstream banks have also cooled activity. “Change of use is one of the most effective ways of adding homes, yet delivery has been in decline,” Samuels noted, pointing to supply-chain pressures and expensive funding as major headwinds.
Specialist finance offers a lifeline
Despite the downturn, specialist lenders are keeping some schemes alive. Octane highlights growing demand for bridging loans, refurbishment finance and development exit facilities that let developers move quickly or release equity when projects get costly. “Specialist finance gives developers the speed and flexibility to secure sites and fund conversions,” Samuels added, positioning the sector as critical to maintaining rental supply when traditional funding falls short.
Editor’s view
For buy-to-let investors, the figures are a warning sign. A sustained drop in change-of-use completions means fewer future rental properties just as demand remains intense. Unless ministers ease planning hurdles and lenders loosen criteria, the shortfall could drive rents higher and shrink choice for tenants. With Section 21 reform and tighter regulation already unsettling landlords, the question is whether government will adapt quickly enough to prevent an even deeper supply squeeze.
