House price growth could be dampened by Michael Gove’s relaxation of planning rules, experts have said.
Under legislation laid in Parliament on Tuesday, laws allowing commercial buildings to be turned into homes without planning permission will be extended to shops and larger office buildings.
The changes are part of a package of measures to boost housebuilding, which also include instructions for local councils to prioritise developments on brownfield land.
Mr Gove, the Housing Secretary, said the approach would deliver “thousands of new homes where people want to live and work, without concreting over the countryside”.
Cameron Misson, an economist at the Centre for Economics and Business Research think-tank, said that the changes would likely boost the availability of homes, which could lead to smaller house price rises in the coming years.
He said: “Increasing housing supply could potentially soften future house price growth.”
Mr Misson said that the time frame for any effect on house prices would depend on how quickly the reforms are implemented.
The CEBR forecasts a 1.9 per cent decline this year – because high mortgage rates have made houses less affordable – followed by a 2.1 per cent rise in 2025.
House prices dropped 1.8 per cent in 2023, according to Nationwide. The lender said the average UK house price in January was £257,565.
Mr Misson said recent falls had been “weakened” by the “constricted” supply of housing.
Planning permission is currently required to convert office spaces larger than 1,500 square feet (140 sqm). But under the plans to extend so-called “permitted development rights”, this size limit is expected to be scrapped.
Stuart Baillie, head of planning at Knight Frank estate agents, said that he is seeing a lot of interest in converting inner city office blocks, which are struggling to achieve higher energy efficiency standards.
Under current Government proposals, all commercial buildings will need to have a minimum energy performance certificate rating of C by 2027.
Similar proposed energy efficiency targets for households, including rental properties, were scrapped last year.
Mr Baillie said office conversions could become more popular in areas such as city centres and suburban business parks, where the demand for office space has slumped since the pandemic.
But he warned that the number of new homes would represent a “drop in the ocean” compared with what would be required to significantly boost housing stock.
“We’re talking about maybe a few hundred new homes being created through this rather than the tens of thousands that are needed to make a material impact.”
Mr Baillie also warned that there were questions over “some of the quality that you’re going to get” converting large office and commercial space for residential use, because such buildings tend to lack outdoor spaces and gardens.
The Government has repeatedly missed its target of building 300,000 homes a year. Asked about the plans to relax permitted development rights on Tuesday, housing minister Lee Rowley refused to say how many new homes would be built.
“I don’t have a specific number. What the Government is trying to do is change the framework so that there [is] more that can come forward, so that we can give developers the opportunity to bring more through,” he told the BBC.
The Local Government Association has strongly opposed extending permitted development rights as it believes this will result in poor quality accommodation and a loss of affordable homes.