Jeremy Hunt: Any house to be split into two flats within permitted development

In the Autumn Statement 2023 today (Wed 22nd November), the Chancellor Jeremy Hunt announced that the Government “…will consult on a new permitted development right to allow any house to be converted into two flats provided the exterior remains unaffected.”

At the time of writing there has been no further information published by the Government on this proposal. A consultation of this nature is likely to be 2-3 months, with the government taking a further number of months to respond to the consultation before implementing any change.

Consequences

If enacted, this change in permitted development rights will likely see an increase in conversion of houses into flats, similar to the surge in conversions of houses to houses of multiple occupation (HMOs), because of the value creation possible from splitting a property into two flats.

The conversion of residential family homes into HMOs is permissible under national permitted development rights, however many local authorities have overridden these permitted development rights with the use of Article 4 Directions as they blame the conversion to HMOs for reducing the stock of properties for families and concentrations of HMOs are blamed for anti-social behaviour and adding increased pressure on local resources. This is despite the fact that HMOs have been shown to increase the overall accommodation available.

The conversion of houses into flats is unlikely to have a similar (real or perceived) impact. For example, a large four bedroom family home with four occupants (parents and two children), may be converted to two 2-bedoom flats which is likely to be occupied by a similar number of occupants; it is therefore unlikely that many local authorities will introduce Article 4 Directions restricting the proposed permitted development rights.

The policy could significantly increase the supply of smaller, affordable housing units, especially beneficial in areas facing acute housing shortages. Additionally, it offers the potential for a greater variety of housing options, catering to diverse needs such as those of single occupants, small families, or the elderly. However, the implications of this policy extend beyond just increasing housing availability.

It could also affect property values, with the potential to increase the value of properties due to their new dual-purpose capability.

There policy may also cause concerns about urban density, neighborhood character, and infrastructure strain. Higher urban density can lead to better use of space and resources but might also result in increased traffic and pressure on local services like schools and healthcare. The character of neighborhoods could undergo significant changes, transforming single-family areas into more densely populated ones, which might not be positively received by all residents.

Opportunity

If given the go ahead, this will be a significant opportunity for property developers. Finding the correct properties will be important. As with all property developments, the potential profit from the development will be dictated by three factors, purchase price, development cost, and final sale price. We’ve created a free development profit calculator which you can download here.

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Source: Hansard