Speculators in residential freeholds have today seen them leap in value as the government eases planning on existing blocks of flats … and torpedoes leaseholders trying to enfranchise.
From August 1 blocks of flats up to 30 metres in height can extend by two storeys without the need for planning consent.
The rule change to permitted development rights applies to all detached buildings of more than three storeys that were purpose-built between July 1 1948 and March 5 2018.
This will be a huge boost to the value of the portfolios of the Consensus Business Group (Tchenguiz), Long Harbour (William Waldorf Astor) and Wallace Estates (Prop: Count Luca Padulli) and all the assorted anonymous and offshore investors.
Curiously, LKP met the then housing minister Esther McVey in autumn last year where she said categorically that the easing of planning constraints on building extra storeys would be to the benefit of leaseholders only.
Ms McVey, who is the only housing minister to express some empathy for leaseholders, was adamant that the planning gain would not be to the enrichment of the existing freeholder. Especially the anonymous ones based offshore, who make up a good chunk of the private equity investors in the Long Harbour fund, for example.
Ms McVey was sacked soon afterwards.
The government announcement:
Boris Johnson has announced the most radical reforms to our planning system since the Second World War, making it easier to build better homes where people want to live. New regulations will give greater freedom for buildings and land in our town centres to change use without planning permission and create new homes from the regeneration of vacant and redundant buildings.
Leaseholders will be the losers, however, as freeholds to these buildings will have leapt in value. Any attempt to enfranchise and purchase the freehold has just been made more expensive.
The hand-out to freehold speculators also undermines the work of the Law Commission to make leasehold enfranchisement “simpler and more cost effective”.
Whereas freeholders had to go to the trouble to concoct often spurious arguments to talk up the development potential of a site – and hence its value – now they just need to reference Mr Jenrick’s change of rules.
The government has created a new permitted development right to allow upwards extensions of two-storeys on a block of flats without the need for planning consent. Regulations will allow buildings of up to 30m, when it comes into force on 1 August.
Changes to permitted development rights allowing redundant offices to be converted to lucrative residential have created 100,000 new homes. But they have also been criticised as building “slums for the future”.
It is an open question whether this initiative is actually wise, given that the post-Covid 19 property market is likely to be very different to the past.
Making rich anonymous punters in residential freeholds even richer is also not a good look for the embattled housing secretary.
Even Estates Gazette, the Bible of property interests, referenced Mr Jenrick’s handling of the £1 billion Westferry Printworks planning approval. Mr Jenrick ignored recommendations from the planning inspector to refuse the scheme, helping media tycoon Richard Desmond to avoid £45 million in CIL owed to Tower Hamlets council.
The draft Bill can be seen here.