New research from Excellion Capital highlights a prime opportunity for landlords and property investors to convert commercial buildings into homes without the usual planning permission hurdles. With Labour pledging to build 1.5 million homes by 2029, experts argue that Permitted Development Rights (PDRs) could be key to achieving this ambitious goal.
New-build numbers are falling short
Labour’s promise to deliver 1.5 million homes means they need to facilitate over 300,000 new properties per year. However, historical data suggests this is an uphill battle. Government figures show that in 2023-24, just 198,612 new-build homes were delivered across England—a decline of 6.5% from the previous year and significantly below pre-pandemic levels. In 2019-20, for instance, 219,120 new homes were completed, still well below the required rate to meet Labour’s pledge.
With new-build output heading in the wrong direction, Excellion Capital’s latest findings indicate that Material Change of Use conversions—where properties switch from commercial to residential—could help close the gap. In 2023-24, 21,591 non-residential properties were converted into homes across England, although this figure represented a 3.1% annual decline.
However, while changing a building’s use class can be a lengthy and expensive process requiring planning permission, PDRs provide an alternative route—allowing investors to convert commercial spaces into housing with far fewer bureaucratic hurdles.
Permitted development rights: An untapped solution?
Permitted Development Rights allow certain changes to buildings without the need for full planning permission, offering landlords and investors a far simpler way to bring much-needed housing to market.
Before the pandemic, in 2019-20, 12,375 residential properties were created through PDR conversions. That number fell to 9,990 in 2020-21 but began recovering in 2021-22. However, last year’s total of 8,825 was the lowest since 2019, marking an 8.3% annual decline.
Despite this, regional trends suggest renewed investor interest. Yorkshire & Humber saw a staggering 132.2% increase in PDR-created homes in the past year. The East of England saw a 32.2% rise, while the North East and East Midlands recorded 13.4% and 5.5% increases, respectively.
Landlords can benefit as interest rates fall
Robert Sadler, Vice President of Real Estate at Excellion Capital, believes PDRs represent a unique opportunity for landlords.
“PDRs provide a great way for property owners and investors to convert struggling assets into new homes without the need to secure planning permission,” he explains. “This makes for an extremely fast project turnaround time, which can be highly attractive to lenders who often see PDRs as a low-risk venture with fast returns. As the government pushes to meet its heady new home delivery targets over the next five years, PDRs could play a central role, especially in those places where land and space is limited.”
Sadler also notes that market conditions are becoming increasingly favourable. “There is currently tremendous availability of relatively low-priced debt for residential projects. In the right hands, there are some incredible opportunities just waiting to be unearthed with PDRs.”
He points out that recent interest rate trends may explain why PDR activity slowed. “A recent survey of ours reveals that high interest rates were the most pressing concern among property investors in the UK. High rates meant lower leverage and, ultimately, more equity was required. But now that interest rates are trending downwards, investors shouldn’t be deterred from taking advantage of the opportunities available.”
A landlord-friendly strategy for housing growth
For landlords and property investors, PDRs present a viable route to expanding housing stock while bypassing many of the delays and costs associated with traditional development. If Labour is serious about delivering 1.5 million homes, embracing PDRs as a key part of its strategy will be essential.
With property finance becoming more accessible and demand for housing continuing to rise, now could be the perfect time for landlords to capitalise on PDR opportunities. Whether Labour recognises this potential remains to be seen, but for landlords, the incentives are already clear.
