Guest column by Nick Jopling

On the face of it, it must be good, mustn’t it – converting obsolete office into much needed housing? It’s about reducing regulation, simplifying the complex British planning system, and giving the private sector more flexibility.

The UK has a chronic under-supply of housing – household demand sits over 200,000, while housing supply is at its lowest levels since records began in 1923 at 121,200. As a result, the Government is looking everywhere for solutions and empty, obsolete offices seem a good a place as any.

Unfortunately, it’s not as simple as it looks from afar.

At a recent seminar held jointly by the ULI’s Mixed-Use Council and the ULI’s UK Residential Council seven experts from varying fields in the property sector presented their views on the ‘office-to-resi’ proposals put forward by the UK Government this spring and the overall sentiment was fairly cautious.

The UK Government is considering proposals to provide permitted development rights for a change of use from B1 use class (offices) to C3 (residential). This would make it demonstrably quicker and easier to convert offices into residential units, as it would mean being able to bypass the planning application route. It would be applicable to conversions that don’t require substantial structural or external changes.

There are risks involved as with most public policy changes, but the UK Government is clearly aware of them. Many of questions in the consultation ended with “subject to effective measures being put in place to mitigate the risk.”

At our recent seminar, we examined many of the risks and concerns. They ranged from the impact it will have on the ability of the City of London to maintain its pre-eminence in the global financial industry, undermining office valuations and local government plans (David Lunts, interim executive director for housing for London’s Mayor, Boris Johnson) to the complexity and suitability of design and typography (Russell Pedley, Assael Architects). In fact, according to Richard Donnell, director of research at Hometrack, one of the UK’s leading housing researchers, the only place where the numbers are attractive is London.

Since our event was held, the Financial Times reported that the government’s plans for office-to-resi are going to be scaled back (“Plans to turn offices into flats hit setback”, Jim Pickard, 9 November 2011, London) following fierce opposition from the City of London Corporation, local government and Whitehall officials.

Exactly where the government’s proposals will end up is still not clear. It is likely that they won’t abandon the idea completely, but it won’t be as substantial as first mooted by George Osborne in his growth review in spring. So it seems it’ll be more a case of tinkering around the edges than substantially addressing the UK’s housing crisis.

It is expected that the government will announce their decision in either the growth review or in the government’s national housing strategy before the end of the year.

Many thanks to the panellists Richard Donnell, Hometrack, David Hutton, CORE, David Lunts, Greater London Authority, Russell Pedley, Assael Architects, Alison Tero, CB Richard Ellis, Mark Farmer, EC Harris, and Dominic Grace, Savills. And special thanks to Van Stults of Orion Capital Managers and the chairman of the ULI Mixed-Use Council and to Lazard for hosting.