"The Government has set itself some very ambitious housing targets, but the reality is that these will never be achieved through new-build delivery alone"
- Jonathan Samuels - Octane Capital
A fall in the number of homes delivered through conversion projects could make it harder for the Government to meet its housing targets, according to Jonathan Samuels, CEO of Octane Capital. The firm’s latest analysis shows that housing created via change of use has dropped significantly over the past five years.
Octane Capital reviewed official government figures on net housing supply and found that 114,961 homes were delivered through change of use in the most recent five-year period. This represents a 22% reduction compared with the 147,458 homes created in the preceding five years.
Every region has recorded a decline. The North East has seen the largest fall, with numbers down by more than half (-52.6%). London has also been heavily affected, with completions almost halved (-49.7%). The East Midlands (-26.3%) and East of England (-23.5%) have faced notable reductions, while the West Midlands recorded only a slight drop (-1.3%).
Multiple pressures have contributed to this trend. Developers have faced tighter planning restrictions, particularly around permitted development rights, which had previously supported large numbers of office-to-residential conversions. Rising build costs, supply chain disruptions, and higher interest rates have also reduced the financial viability of projects. In addition, mainstream lenders have tightened their criteria, making it more difficult to access funding.
Despite these headwinds, change of use is still regarded as one of the quickest and most effective ways to expand housing supply, especially compared to the longer timelines of new-build schemes. Specialist lenders are continuing to support this route, helping developers bring forward projects that might otherwise stall.
Octane Capital points to bridging loans, refurbishment finance, and development exit facilities as examples of how finance options are keeping projects on track. These tools can help developers respond to opportunities, restructure deals as costs rise, or free up capital to move on to further sites.
“The Government has set itself some very ambitious housing targets, but the reality is that these will never be achieved through new-build delivery alone,” said Jonathan Samuels, CEO of Octane Capital. “Change of use is one of the most effective ways of bridging the supply gap, yet delivery has been in decline. A lack of funding, stricter planning, and rising costs are all standing in the way.
“However, the specialist finance sector is helping to combat this trend by giving developers the speed and flexibility to secure sites, fund conversions, and bring much-needed homes to market. At Octane Capital, we’re committed to supporting projects that make a meaningful difference to supply, particularly in a climate where mainstream funding routes are often limited.”
