• James Wyllie

How changes to permitted development rights can benefit developers

Updated: Jul 15, 2021

Downing street road sign where permitted development rights are changing to benefit developers

The government has announced that from the 1st August 2020 there will be changes to permitted development rights allowing for additional storeys for blocks of flats. In a move that is designed to promote the building of new homes, here we look at the details of the changes, and how developers might be able to take advantage of the changes.

What are the changes?

From the 1st August 2020, new permitted development rights will allow pre-existing detached blocks of flats of three or more storeys to be extended upwards by 2-storeys (to a maximum total height of 30m), to create new flats without the need for planning permission. The purpose built flats must have been built between 1948 and 2018.

Development will only be permitted subject to a Prior Approval process, whereby the Council will be able to consider matters including transport and highways impacts, air traffic and defence asset impacts, contamination, and flood risk. Buildings must not be listed or in proximity to aerodromes.

In addition, matters of external appearance, adequate natural light, and impact on amenity amongst other criteria, may also be taken into account.

Why are the changes being made?

The UK is beset by a chronic shortage of housing and in response to this, the government has set a target of building 300,000 new homes a year (you can read more here on the government's current performance). As part this, in 2018, the government conducted a consultation to review permitted development rights where the such changes were considered. In March the government set out its white paper 'Planning for the Future', with the changes remaining part of its plan. And then last week, the government announced the changes would definitely be happening "to provide more certainty for developers and local authorities, and so encourage take up, while protecting local amenity".

The government has identified the opportunity to create new housing by densifying existing buildings as well as the development of new builds. By focusing on this opportunity the government is hoping to protect the need to build on greenfield sites.

The timing of the announcement also coincides with the governments attempts to get the economy moving following the huge impact of COVID-19. By easing restrictions and reducing the costs of having to apply for full planning permission, the government will hope to kick-start projects, and in turn provide much needed stimulus to the construction industry.

How can developers take advantage of the changes?

Montpelier Private Finance, has a long established track record of procuring market leading development finance for developers. As an independent broker, we have full market access to the keenest funding terms available. To partner the changes announced, we are delighted to able to procure the following product on behalf of our clients:

  • 70% net lending against existing asset value plus 100% of works costs (funded in arrears), subject to overall gearing not being greater than 70% loan to GDV

  • 2% lender arrangement fee (deducted from day one 70% net loan)

  • £995 admin fee (deducted from day 1 70% net loan) - this cover the initial drawdown plus one subsequent stage release.  Each stage release thereafter is circa £250 for the Asset Manager to visit site

  • 0.78% per month rolled up

  • 0% exit fee

  • 100% of works costs funded (in arrears) - subject to works costs not being greater than 50% of the day one value of the asset

  • 70% maximum Loan To Gross Development Value (gross)

This is just one of the products that are available to our clients. If you would like to a specific project you can contact us here.

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