New research from the London School of Economics suggests that more than 500,000 homes could be created by converting empty non-residential buildings across the UK. That’s half a million potential homes sitting inside old shops, offices, pubs, and warehouses — spaces you probably walk past every day without a second thought. For anyone trying to get onto the property ladder or find affordable rental housing, that number represents a genuine opportunity that’s already sitting there, waiting to be used.
I’ve been writing about UK property for long enough to notice a pattern. Every time the housing crisis comes up, the conversation turns to building new homes on green fields or brownfield sites. Rarely does anyone mention the empty office block on the high street or the pub that’s been boarded up for three years. Yet those buildings are often structurally sound, well-located, and far quicker to convert than starting from scratch. The research backs that up — retrofitting existing buildings bypasses many of the planning and cost hurdles that slow down traditional housebuilding. Here’s what you actually need to know.
If you’re thinking about buying a home or investing in property, understanding how these conversions work could open up options you hadn’t considered. The process isn’t as complicated as you might think, and the rules have changed in ways that make it easier than it used to be. I’ve covered why traditional housebuilding struggles to keep up before, and conversions offer a genuine alternative. A good place to start is getting professional advice on the legal side — a property lawyer can help you understand what’s possible with a specific building.
What Commercial-to-Residential Conversion Actually Means
The most important thing to understand is that you don’t always need full planning permission to turn a shop or office into a home. Under the Town and Country Planning (Use Classes) (Amendment) (England) Regulations 2020, a new commercial class — Class E — was created. This class combines several previous categories, meaning owners can change the use of a building within Class E without needing planning permission. And crucially, converting from Class E to residential use is covered by permitted development rights, subject to prior approval.
Prior approval applications are assessed within 56 days, which is far quicker than the months-long wait for a full planning application. To be eligible, the building must have been used under Class E — or its precursors — for at least two continuous years. There’s a catch though: Class MA doesn’t allow for external changes, so the building’s design has to work without adding new windows or doors. That’s a real constraint, but it also means the process is faster because there’s less to argue about.
What I’d do if I were looking at a conversion: check the building’s use history first. If it’s been empty for less than two years, you might need to wait or explore other routes. A look at how brownfield regeneration works can give you a sense of the broader picture. And if you’re unsure about the legal side, speaking to a real estate lawyer early on can save you time and money.
Why This Matters for the Housing Crisis Right Now
In England alone, there are around 175,000 privately-owned, empty non-residential properties. That’s not a small number — it’s roughly the same as the total number of homes built in England in a typical year. Many of these buildings are structurally sound and well-located, sitting in town centres with good transport links and existing utilities. They’re not derelict wrecks; they’re just unused.
Take the example of a property in Kentwood Hill, Reading. The Balada Group negotiated a purchase price of £320,000 for a building that was in good condition with no adverse issues like reinforced autoclaved aerated concrete (RAAC). The valuation surveyor confirmed it was suitable for conversion. That’s a real-world case showing that these opportunities exist and are viable. The building was converted into a small HMO of up to six rooms under Class C4, with a daylight assessment confirming the unit received at least 50% more natural light than before.
There’s a demographic angle too. Younger buyers and renters are increasingly looking for homes in town centres, close to work and amenities. Conversions of high-street buildings can deliver exactly that — homes in locations where people actually want to live. I’ve noticed that the conversation around housing often focuses on suburban estates, but the demand for city-centre living hasn’t gone away. If you’re a first-time buyer struggling to find something affordable, a converted flat above a shop might be worth a serious look. For more on that, first-time buyer struggles in the UK are something I’ve written about in detail.
What I’d do: if you’re looking for a home or an investment, start by walking through your local town centre and noting which buildings are empty. Then check their use history. You might be surprised at what’s available. A financial advisor can help you work out whether the numbers stack up for your situation.
Where People Go Wrong with Conversions
Underestimating the VAT Trap
This is the biggest one. While new builds are typically exempt from VAT, most conversions are taxed at 20 per cent. The LSE research calls this out directly — the tax system favours new construction over reuse. If you’re budgeting for a conversion and haven’t factored in VAT, you could be looking at a significant shortfall. The fix: get a clear VAT assessment from a specialist accountant before you commit. Some conversions can qualify for reduced rates if the building has been empty for a certain period, but the rules are complex.
Ignoring Building Regulations Compliance
Commercial-to-residential conversions are classified under Building Regulation 5, which requires additional checks by an approved inspector. This isn’t optional. You’ll need an energy performance certificate, acoustic and air quality testing, and water efficiency calculations. In the Reading case, they also needed a commissioning and compliance certificate for the misting fire system. The process involves developing an as-designed report and an as-built report. Skipping these steps can delay sign-off and cost you far more than doing them properly the first time.
Assuming You Can Change the Outside
Class MA permitted development rights don’t allow for external changes. If the building doesn’t have enough windows or the layout doesn’t work for residential use, you can’t just add them. That means you need to be realistic about what the building can become. A daylight assessment is essential — in the Reading case, the unit received at least 50% more natural light than before, which confirmed the conversion was viable. If your building fails that test, you might need to look at a different property.
Overlooking the Two-Year Use Rule
To qualify for prior approval under Class MA, the building must have been used under Class E — or its precursors — for at least two continuous years. If it’s been empty for less than that, or if it was used for something else, you might not be eligible. This is where a property management guide for landlords can be useful, as it covers the kind of due diligence you need to do upfront. A tenant landlord lawyer can also clarify the eligibility rules for your specific case.
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| Requirement | What It Involves | Why It Matters |
|---|---|---|
| Prior approval | 56-day assessment by local authority | Simpler than full planning permission |
| Building Regulation 5 | Approved inspector checks | Mandatory for commercial-to-residential |
| Energy performance certificate | Required for all new dwellings | Legal requirement for sale or rent |
| Acoustic testing | Sound insulation between units | Ensures residential standards are met |
| Water efficiency calculations | Compliance with building regs | Part of building control sign-off |
What I’d do: before you even view a property, get a checklist of these requirements and run through them. If the building can’t meet them, move on. A business lawyer can help you review contracts and compliance requirements before you exchange.
How to Actually Convert a Commercial Building into Homes
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Check Eligibility and Use History First
Before you do anything else, confirm that the building has been used under Class E for at least two continuous years. You can check this through the local authority’s planning records or by asking the seller for evidence. If the building doesn’t qualify, you might still be able to apply for full planning permission, but that’s a longer and more uncertain process. The two-year rule is the single most important eligibility criterion, and getting it wrong wastes time and money.
Submit a Prior Approval Application
Once you’ve confirmed eligibility, submit a prior approval application to the local authority. The assessment takes up to 56 days and covers transport, noise, flood risk, and contamination. You don’t need to submit detailed architectural plans at this stage, but you do need to demonstrate that the conversion is feasible. If the authority raises objections, you can address them during the assessment period. If they don’t respond within 56 days, the application is deemed approved.
Manage Building Compliance from Day One
Commercial-to-residential conversions fall under Building Regulation 5, which means you need an approved inspector. Start the compliance process early — don’t wait until the work is finished. You’ll need an energy performance certificate, acoustic testing, air quality testing, and water efficiency calculations. In some cases, you’ll also need a commissioning certificate for fire safety systems. The Reading project required a misting fire system certificate. Develop an as-designed report before construction and an as-built report after completion. This is where a guide to small-space living can give you ideas on how to make the most of the floor area.
Plan for Phased Construction and Financing
Conversions are faster than new builds because the structure already exists, but they still take time. The Reading project had an eight-month construction period followed by a one-month refinancing process, moving from a bridging loan to a traditional buy-to-let mortgage. Plan your financing accordingly. Bridging loans are common for conversions, but they have higher interest rates, so you want to minimise the time you’re on them. Have your exit strategy — usually a mortgage or sale — lined up before you start.
- 1Check use historyConfirm the building has been in Class E use for at least two continuous years through local authority records.
- 2Submit prior approvalApply to the local authority and wait up to 56 days for assessment. Address any objections during this period.
- 3Engage an approved inspectorStart building compliance early — EPC, acoustic testing, air quality, water efficiency, and fire safety certificates.
- 4Secure financingUse a bridging loan for the construction phase, then refinance to a buy-to-let mortgage or sell upon completion.
What I’d do: get a small claims lawyer involved early if there are any disputes about the property’s history or condition. It’s better to sort those out before you commit.
Frequently Asked Questions
Can I convert a pub into flats without planning permission? ▾
What happens if the local authority rejects my prior approval application? ▾
Do I need an energy performance certificate for a converted flat? ▾
Can I convert a building that has RAAC concrete? ▾
Is VAT always 20% on conversions? ▾
If you’re planning a conversion, a carbon monoxide alarm is a sensible addition to any converted property, especially if the building had previous commercial use with different ventilation requirements.
Sources and Further Reading
Coastal living vs city life — A comparison of lifestyle and investment returns that helps put town-centre conversions in context.
Finding hidden gem properties — Practical tips for sourcing off-market opportunities, including empty commercial buildings.
Empty buildings and the UK housing crisis. London School of Economics, 2024.
Effective commercial to residential conversions. RICS Property Journal, 2024.
