A sharp fall in homes created through change of use is constraining the UK’s housing supply and could prevent the Government from meeting its ambitious delivery targets, according to Octane Capital.
Analysis by the specialist lender shows that just 114,961 homes were delivered through change of use in the last five years, a 22% drop from the 147,458 completed in the previous five-year period.
The decline has been felt across all regions, with the North East hardest hit, down 52.6%, followed by London (-49.7%), the East Midlands (-26.3%) and the East of England (-23.5%).
Even the West Midlands, historically more resilient, saw a small fall of 1.3%.
AMBITIOUS TARGETS
Jonathan Samuels, Chief Executive of Octane Capital, says: “The Government has set itself some very ambitious housing targets, but the reality is that these will never be achieved through new-build delivery alone.
“Change of use is one of the most effective ways of bridging the supply gap, yet delivery has been in decline. A lack of funding, stricter planning, and rising costs are all standing in the way.”
Several factors have contributed to the slowdown. Stricter planning rules, including limits on permitted development rights, have reduced the number of straightforward office-to-residential conversions.
Rising construction costs, supply chain pressures, and higher interest rates have also made projects less financially viable, while mainstream lenders have tightened criteria, further restricting activity.
