The government has set an ambitious target of delivering 1.5 million net additional dwellings over five years, which would require an annual output of 300,000 homes – a level not achieved since the 1970s.
Whether or not this is achievable remains to be seen, but the target becomes perhaps less daunting when you consider that it doesn’t need to rely solely on new builds. Ground-up construction will undoubtedly play a critical role, but it’s not the only answer and realising the potential of existing, underutilised, properties can play a critical role in helping to meet the challenge of the country’s housing shortage.
According to Action on Empty Homes, there are almost 700,000 empty properties in England, with more than 265,000 classified as long-term empty. These buildings are dormant assets and transforming them into usable housing would provide a meaningful contribution to addressing the shortfall. What’s more, the opportunities for renovation extend far beyond this number as disused commercial and agricultural buildings also hold potential for conversion into much-needed housing.
This potential does seem to be on the radar of policy makers. Last year Permitted Development Rights (PDR) were extended to include more property categories and make conversion to residential use more accessible. For example, under the changes, the number of homes that can be built from the conversion of agricultural buildings has doubled from five to 10 without requiring planning permission. Additionally, the amount of agricultural floorspace eligible for conversion to flexible commercial use has also doubled, allowing for larger and more impactful developments. There are reports that further efforts to streamline the planning process are on the way, which should open more opportunities for investors to deliver new housing, both through ground-up developments, as well as the conversion of existing buildings.
For investors, there are definite benefits to renovating and repurposing existing structures rather than building from scratch as it is often cheaper and easier to deliver a conversion project than a new build. It is also often more efficient and sustainable, avoiding the environmental costs of new construction and creating housing faster.
Funding a conversion project can also be more straight-forward and cost effective than a ground-up development as bridging lending, even for heavy refurbishment, tends to be cheaper and more accessible than development finance.
One way that investors can take an even more cost-effective approach to delivering new homes is by opting for a heavy refurbishment bridging loan that offers the ability to draw down funds as and when they are needed.
Large-scale renovation and conversion projects often unfold over extended timelines, with costs incurred in phases. Borrowing the full amount upfront can leave investors paying unnecessary interest on funds they don’t yet need, so to address this, Castle Trust Bank developed our Heavy Refurbishments with Drawdowns product.
This product enables borrowers to draw down funds in stages, paying interest only on the amounts they have used, while leaving the remaining facility available for when it is needed. By aligning borrowing costs with project timelines, it helps investors deploy their resources efficiently and reduce unnecessary expenses. And we recently enhanced the product further by streamlining the monitoring process and introducing a standardised fee scale, making it faster and more straightforward for borrowers to access funds.
The government has set ambitious building targets to tackle the housing crisis, and it will be looking of developers and property investors of all sizes to help deliver the homes that are needed. Those targets look more achievable when you start to look beyond new-build developments and considering the potential of existing properties. With a simplified planning process and further expansion of PDR, property conversion could present huge opportunities for investors, and product features like drawdown facilities can make it even more cost-effective to access those opportunities.
