No Need for Planning Permission to Convert a House into Flats
In the Chancellor's Autumn Statement on November 22nd 2023 it was announced that the government is planning to remove the need for planning permission when subdividing a house into two flats. This will present property developers with a great opportunity to profit from buying a house and then dividing it into flats and it will also help improve on the shortfall of available housing in The UK. A government consultation will be held in early 2024 with the intention to approve the Permitted Development Rights during 2024. So far the only stipulation is that the exterior of the house cannot be changed.
For property developers this means that they won't be able to add a new separate front door to the front of the house, instead they will have to construct a separate door internally. The exterior look of a house won't change but there will be an issue with more residents living on a road and in the consultation the government will surely discuss parking requirements for more cars and implications and considerations given for local councils.
The Permitted Development Right to convert one house into two flats from the chancellor's statement says "The government is announcing a consultation on a new Permitted Development Right for subdividing houses into two flats without changing the façade. This will be implemented in 2024 following consultation early in the New Year"
Among the many important topics covered during the Chancellor's statement this proposed change didn't receive much press coverage and was overlooked by the main news. However, for property developers this is big news, not only will it make life a lot easier by removing red tape and save time and costs in applying for planning permission it will also eliminate the huge risk of buying a house with the intention to convert it into two flats but risk having your planning permission rejected.
What Does Permitted Development Rights Mean?
The term Permitted Development Rights was initially introduced in 2008 and it essentially means that you can go ahead and develop a property for various reasons without needing planning permission. Back in 2008 property investors embraced the news that they were allowed to convert a house into a House in Multiple Occupation (HMO) without the need for planning permission. This resulted in many landlords improving the yield of their existing rentals by making more money from renting out individual rooms and it also opened the door for newly acquired properties to be easily repurposed as an HMO. Landlords made more profit and the government also addressed the shortage of available housing issue. This new measure of being granted Permitted Development Rights to convert a house into two flats will once again help towards solving the housing shortage in The UK and it will benefit property developers in the following ways:
How Will Landlords and Property Developers Benefit?
- Save time, costs and eliminate the risk of acquiring a property before obtaining planning permission.
- Two flats are often worth more than one house.
- Existing landlords of a house will be able to divide a house into two flats and receive two rental incomes from the same property, quite possibly equating to a higher yield than they currently receive.
- Landlords will have the option to convert the house into two flats and sell one flat and retain the other flat as a property investment. This method could possibly help the landlord to pay off some or all of the remaining mortgage balance, leaving the landlord with a mortgage free flat. Existing landlords can boost the total value of their asset by splitting the house into two flats and then receiving a far greater capital gain than they initially expected.
- Property developers will have more confidence to go ahead and acquire a property and fulfill their intention of converting it into two flats.
- Property developers will have a more realistic refinancing opportunity once the property is converted into two flats. With the property being worth more than their investment, this will allow them to remortgage the property and recycle their initial investment to be used to further expand their property portfolio.
What Costs Need to be Considered When Converting a House into Flats?
- For developers they will need to weigh up if the two flats will be worth more than the original purchase price of the house plus the development costs.
- Here are some of the costs to consider when converting a typical house into two flats:
- Fitting two front doors within the inner hallway. One door leading to the stairs and another leading to the ground floor flat.
- Fitting a bathroom in the downstairs flat.
- Fitting a Kitchen in the upstairs flat.
- Fitting a separate boiler and heating system upstairs.
- Splitting the water / gas and electricity meters into separate meters.
- Re-purposing the front garden or driveway into separate parking spaces.
Other Positive Property News Announced in The Chancellor's Statement
- The ability to buy a house for your own residential needs with a 5% deposit has been extended by another 18 months.
- Rent received for housing benefit tenants will be increased, the first rent increase since 2020.
- Investment in speeding up the process to buy a house.
- Efforts to speed up the process of obtaining planning permission where needed.
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