Can the government do more to unlock airspace development?

COMMENT The new government has prioritised residential development, not only to solve the housing crisis but to boost wider economic growth. The supply of land, whether brownfield, greenfield or the much talked about grey belt, has dominated the headlines and is a key theme of its revisions to the National Planning Policy Framework that are now out for consultation. This is where the majority of the development required to meet the five-year target of 1.5m homes is going to come from. However, the contribution of other development should not be overlooked and, in urban areas, adding to existing buildings has an important role to play. Airspace development does feature in the revised NPPF, but there is more that the government could do to encourage it, not least by ensuring that it isn’t tripped up by existing and new legislation that is intended for other purposes. Looking up? London is the obvious UK case study where land is scarce but residential property values mean that the higher cost of developing existing buildings is viable. In 2017, as part of its “Skyward” initiative, Knight Frank estimated that 41,000 new dwellings could be constructed on top of existing buildings in central London. A more detailed analysis of sites suitable for development carried out in Camden by Apex Airspace and HTA Design in 2016 identified 475 sites in that borough alone. These were sites ripe for development even before the introduction of permitted development rights in 2020 which allowed up to two additional floors to be built on top of certain residential buildings without planning permission. Despite this, airspace development has been limited and, in late 2023 and early 2024, the previous government consulted on changes to PDRs to widen the 2020 provisions. The proposals encountered resistance and, indeed, the Local Government Association said it opposed all PDRs in principle. It considers a properly working planning system to be a better way forward to deliver quality development. In any event, the changes were not implemented before the general election. The LGA’s view seems to be shared by the new government and, if it can be achieved at local government level with a positive policy framework, this would be welcomed. On the policy front, the revised NPPF retains existing provisions that promote airspace development and supplements them with further changes. These include the removal of the requirement to consider the height of neighbouring properties and the removal of the obligation to maintain a design code to consider residential densities against the character of the existing area, as well as a relaxation of some of the restrictions affecting mansard development. All of this has the backdrop of the reintroduction of mandatory targets and additional obligations on local authorities to ensure the building of more homes. This will be helpful for airspace development, but planning changes are not a silver bullet and building on top of existing occupied buildings is subject to additional legal obstacles. Hurdles to clear The freehold owners of residential and mixed-use buildings are not usually specialist developers, so often look to grant an airspace lease to a developer. This lease might first have to be offered to existing flat owners under the Landlord and Tenant Act 1987. The flat owners would have to pay for the lease so may be unlikely to want to buy it (other than to thwart the development), but there is a lengthy, expensive and convoluted process that needs to be followed, with criminal sanctions if you get it wrong. At best this delays the development and adds cost and risk. At least with the 1987 Act the freeholder and developer know that once they have gone through the statutory process, they are broadly able to get on with the scheme. However, under the Leasehold Reform, Housing and Urban Development Act 1993, flat owners can at any time, if they qualify, get together to force the sale of the freehold of their building through collective enfranchisement. In doing so, under the current law, they would have to compensate the freeholder for its loss of the development value, but there is no mechanism under the 1993 Act to flush out whether or not they are going to do this, not to mention the lengthy and uncertain process to establish the amount payable. This could have been compounded by the Leasehold and Freehold Reform Act 2024, enacted right at the end of the last parliament. The new Act With the aspiration to reduce the cost of enfranchisement, one of the proposals consulted on was for leaseholders to offer a restriction preventing them from developing instead of paying compensation. Fortunately, this did not make it into the final legislation, but if it had done so it is likely to have prevented the development of large numbers of residential and mixed-use buildings. Another provision that did make it in was a change to the non-residential threshold for collective enfranchisement of mixed-use buildings from 25% to 50%. When the 2024 Act is implemented, the number of buildings exposed to the risk will be significantly increased to include those with a lower proportion of existing residential use. This may include schemes already underway that did not contemplate the change. What is clear from these examples (and there are others) is that, to unlock airspace development, the government has to look beyond planning. It needs to reconsider other existing legislation, perhaps thinking about exemptions for new development or overriding existing rights through compulsory purchase, and ensure a joined-up approach when bringing forward new law. If the 2024 Act had provided for development restrictions instead of compensation, it would have been a disaster for airspace development. The government is still to implement the 2024 Act and has a significant agenda of its own for residential leasehold reform. In granting additional rights to “empower” existing leaseholder homeowners, it must be careful not to inadvertently make airspace development harder, potentially taking away new homes that might otherwise be available for those not yet on the housing ladder. Jason Tann is a partner at Howard Kennedy LLP