Communities and Local Government CommitteeWritten evidence from the City of London Corporation

1. The draft National Planning Policy Framework rightly emphasises the role of the planning system in promoting economic growth and prosperity—or, to quote from the principles set out in paragraph 10 of the draft, in building “a strong, competitive and responsive economy.” Paragraph 72 sets out the laudable ambition to “plan proactively to meet the development needs of business and support an economy fit for the 21st century.” It is clearly acknowledged, in paragraph 19, that this will require local planning authorities to strike an appropriate a balance between the needs of the residential and business communities.

2. A separate aspect of the Government’s proposed reforms to the planning system threatens seriously to undermine these objectives. A consultation has already taken place on removing the need to obtain planning permission before converting commercial premises into dwellings. Such a move might be helpful in some parts of the country, where office buildings stand vacant or derelict but housing is seriously under-supplied. However, if applied indiscriminately, it risks having a deleterious effect on local authorities’ ability to preserve key business districts, with all the clear economic benefits which they bring.

3. The danger is particularly acute in relation to the City of London. The City’s success in maintaining its position as one of the world’s leading commercial centres depends in large part on its confining residential development to certain areas of the City, leaving others for exclusively commercial uses. This is a central and long-standing feature of the City Corporation’s strategic planning, including the recently adopted LDF Core Strategy which has been endorsed by the Mayor of London and an independent planning inspector. It has played a vital role in sustaining the “critical mass” of diverse commercial activities which drives the international success and economic contribution of the Square Mile. It enables a continuous programme of development and renewal to ensure a steady supply of buildings fit for the requirements of a growing and ever-evolving business sector. It also allows the City Corporation to allocate services and resources in the most effective manner for businesses and residents alike.

4. The position of the City of London as an area predominantly focused on business is recognised in the Mayor of London’s London Plan, which emphasises the importance of “local approaches” to the mix of housing and offices, “especially to sustain strategically important clusters of commercial activities such as those in the City of London”.

5. If the City Corporation were to lose all control over the volume and location of residential development, the predominantly commercial character of the City would come under threat from short-term market forces. In the present circumstances, these forces could well provoke a spate of residential conversions across the City, as housing offers the immediate prospect of higher returns than offices on many sites. An independent study commissioned by the City Corporation recently revealed findings which very ably demonstrate the scale on the scale of this risk. It is estimated that some 13 million square feet of commercial floor-space—approximately one fifth of the total office stock in the Square Mile—would become vulnerable to residential conversion within the next five years.

6. The effects of this would be damaging in a number of ways, which, taken together, would pose a genuine threat to the competitive position of the City. First, there would be the straightforward reduction in floor space available for commercial use. Given that residential premises are generally let on long leases, this would be difficult to reverse once it had occurred. Second, the presence of individual residential units distributed within commercial areas would inhibit developments of new commercial premises. It would only require one or two resistant homeowners effectively to stymy large-scale and valuable schemes, whether through presence in the site proposed for development or through objections based on matters such as rights to light. Third, the day-to-day operational needs of businesses would be brought into conflict with residential amenity. For instance, it is often most efficient for construction work, deliveries and servicing to be undertaken at night, but this would lead to problems with noise in areas where residents were present. Such issues have already arisen in the few areas where residential development has occurred in the vicinity of commercial premises.

7. The City recognises the importance of increasing the capital’s, and the country’s, housing supply. The City Corporation has played its part in this, with the number of residential dwellings in the City of London almost doubling over the past two decades. The City Corporation also manages some 2,700 houses in neighbouring boroughs. Surveys of residents in the City reveal high levels of satisfaction—on the latest figures, 92% of residents were satisfied with their local area as a place to live, and 73% expressed themselves satisfied with the Corporation’s provision of services (compared to just over half in Greater London as a whole). However, if this broad residential satisfaction is to be maintained along with the City’s position as a modern business district of global strategic significance, it is vital that residential development is undertaken in a controlled and coordinated manner.

8. It would seem unlikely that the ambition behind the proposal was to displace the vital commercial activity of the Square Mile in favour of residential apartments, which, given the nature of the affected areas, would no doubt serve the higher end of the market. It is important that this should not become an unintended consequence of the policy. There is therefore a strong case for the proposed change not to apply within the City of London. The peculiar nature of the City, as well as being recognised in the London Plan, is reflected in existing legislation—both in the planning field, where the City Corporation has greater freedom to consider applications for taller buildings than in other areas, and more generally, with the City retaining the only business franchise for local elections in the U.K. and levying a small supplement on business rates to provide additional services to businesses. Therefore there are sound precedents for the City to be treated in distinct form where matters of commercial importance are concerned.

9. An alternative might be to encourage the conversion of vacant offices into homes through a strong statement of policy to this effect in the National Planning Policy Framework, rather than deploying the “nuclear option” of a general grant of permission. This would seem a more proportionate solution, and would amount to a sensible compromise between the legitimate policy objectives of the Government and the role of local democracy in shaping the character of local areas. It would increase the confidence of developers in initiating schemes for commercial-to-residential conversions in suitable cases, while crucially leaving room for manoeuvre for local authorities to protect strategic commercial interests.

10. The Chancellor and the Secretary of State for Communities and Local Government have rightly spoken of their determination not the let the planning system act as a “brake on growth.” For all the valuable policies in the draft Framework, to allow unconstrained residential development in the commercial heart of the U.K. would be to create a new and unnecessary brake on growth. The City Corporation urges that the existence of this risk be recognised, and that sufficient flexibility be shown in the implementation of the change-of-use policy to ensure that the international competitiveness of the Square Mile is not undermined.

November 2011

Prepared 20th December 2011