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Rescue remedy: will government retail-to-resi plans work?

This week the Government took a step closer in making its much-mulled policy to allow retail properties to be converted into residential homes a reality, with the launch of a consultation paper to see what the industry at large make of it.

In essence, the recommendations being put forward are to cut red tape to enable landlords to switch vacant shops into housing “revitalising our high streets and rural towns”.

It is thought that the new policy, which if approved is expected to come into being next April, will target “side streets and edges of town centres”, keeping the prime parts chock full of retail, leisure and entertainment businesses.

The theory is sound in many respects: we are constantly being told about the housing shortage, and with the rise of ecommerce and the scaling back of chains, as well as the closure of several independent retailers, it makes sense to reduce the number of potential units rather than leave scores of shops empty and unappealing.

But there are some pretty major hurdles that the Government doesn’t appear to have addressed in its work so far, chief amongst them being the loss to income local authorities will face if business rate-paying businesses are ditched in favour of rent-paying families. As Bira’s Michael Weedon explained to me this week, “it would be a disaster for local government finance”.

It’s not clear yet whether local authorities will have the right to opt out of this scheme, but there is evidence to suggest that if that path is open to them they will take it. So far, for example, the vast majority of London councils have opted out of plans to enable offices to convert into flats.

And an earlier scheme, offering tax breaks to businesses who converted the spaces above their shops into flats, was scrapped after failing to gain traction.

Another concern is where it would leave smaller retailers who aren’t currently in what might be considered the prime part of a town centre.  According to LDC’s Matthew Hopkinson, there is a high chance they would be evicted or asked to move into an empty unit more centrally to create a more concentrated “magnet in the centre, with residential around it like a doughnut”.

It would be, he says, “one hell of an involved process”, and one that is likely to take years to bring together because of the many different interests involved.

That is, of course, assuming people want to move into the centre, which they may not if there are no jobs (or services). Landlords eager for rent-paying customers to take properties with dwindling commercial value off their hands may be disappointed when the lack of demand comes through: if people don’t want to shop in those towns, they’re hardly likely to want to live in them.

As Weedon says in our piece in this week’s issue, there is really only one benefit to this policy: “to get the PR problem off the Government’s desk”.

If that’s true this particular rescue policy seems hardly worth the paper it’s printed on.

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