The London Boroughs of Islington and Richmond-upon-Thames, with the support of Camden and Lambeth Councils, argued that the hugely controversial amendment to the General Permitted Development Order (GPDO) threatened swathes of their areas with economic meltdown.
Amidst rocketing house prices and the end of the recession, they argued that hard-pressed small businesses would be the biggest losers – many of them having to move to peripheral areas – and that the loss of employment opportunities in heavily built up areas would be irreparable. They also expressed concerns about the potentially substantial loss of revenue from business rates.
However, in announcing the policy change to Parliament, the Secretary of State for Communities and Local Government had said that it would promote economic growth by bringing redundant commercial buildings back into use whilst at the same time easing the housing shortage.
Although local authorities could refuse to approve office to home conversions if they chose, they would face the possibility of having to pay compensation if permission for what would otherwise be permitted developments was declined or granted subject to conditions. Most of the London Central Activities Zone (CPZ) was exempted from the change, but applications by the four councils for exemptions in respect of other parts of their areas were refused.
The London Borough of Islington estimated that 57 per cent of office space in at-risk areas had high potential for residential conversion and feared that commercial tenants would be offered financial incentives to move out. There would be a serious loss of relatively small affordable business units; support services businesses would be put under pressure to move to outlying areas and the loss of employment sites would gravely hamper the areas' economic health. Similar concerns were expressed by the other three councils.
In mounting a wide-ranging attack on the fairness of the decisions, the councils argued that the consultation process had been hurried and fundamentally flawed in that they were not given advance information about the tough criteria that they would be required to fulfil in order to win exemptions from the policy change.
Mr Justice Collins acknowledged that the decision-making process had not been perfect and that 'it would have been sensible' for the Secretary of State to work out in advance the criteria on which exemption applications would be assessed. He said, "I can well understand the concerns which led to these claims and it may well be that, in parts of the claimant boroughs, the benefits which it is believed will accrue from the amendment to the GPDO will not result." The lack of any requirement for affordable housing was also 'worrying'.
However, in dismissing the councils’ judicial review challenge, the judge said that he was 'not persuaded' that they had suffered unfairness. They would have been well aware of the impact of the policy shift, not least on their revenue from business rates, and the Secretary of State had made it clear at an early stage that exemptions would only be granted in exceptional circumstances where there was clear evidence of substantial adverse economic consequences.