Airspace Development: Dreaming of money falling from the skies
11th July 2019
An Article by Megan Eustace
It is estimated that over 340,000 new homes are needed in England per year to serve the ever increasing demand for housing. Couple this with the demand for affordable housing and we are quickly running out of space on the ground; not to mention the disruption this is causing. With new fancy sky-scrapers appearing all over the world accommodating large commercial entities and residential developments, the value of airspace development on top of existing buildings is an important aspect to consider.
Airspace is the unused space atop of existing buildings, which could be better utilised for development. People hadn’t always considered the value of the space above a building, with concerns about the building collapsing or causing the tenants undue disruption. However, an already well-established approach in Europe and the United States – developers can purchase airspace rights from local councils, housing associations and private freehold property owners and convert this space into homes. Not only does it have the potential to generate high income for those parties involved, but it is also providing innovative solutions to unanswered problems, resulting in efficient homes with minimal disruption to local residents.
In 2018, Homes England announced its Five Year Strategic Plan for housing delivery. It talks about ‘disrupting the housing market’ with bold, creative and innovative ways. Development of any kind is always going to be ‘disruptive’, but utilising airspace above existing buildings could play a vital role in helping Homes England be successful with their plan, as it helps to address the funding gap associated with meeting housing targets by using existing assets. To put this into context, it is estimated that 120,000 homes in London alone could be built above existing council blocks and housing association properties, which would address the shortage of affordable housing. Last year, the National Planning Policy Framework highlighted the importance of airspace, with Chancellor Philip Hammond announcing a consultation on permitted development reforms for airspace development to include the high street, an area which is constantly changing to suit the demands and needs of the public. New technology is helping to pave the way to make airspace development possible in terms of construction, however there are many legal issues that will need to be addressed. Case law shows that there have frequently been challenges made when third parties feel that their rights have been infringed.
Where a developer is looking to obtain funding, they may be faced with legal issues such as tenants having the right of first refusal of the development (under the Landlord and Tenant 1987 Act), how the legal agreement may be structured, rights of light, lack of right of airspace or issues arising out of a breach of leasehold covenant. This may preclude and/or delay a purchaser from obtaining funding or post-funding beginning works on site. This is where DUAL Asset Underwriting can help provide a solution to assist the developer in obtaining funding and/or beginning works on site whilst any issues are resolved in the background.
For more information, please contact Megan Eustace – Assistant Underwriter on [email protected] or 0203 808 2592 / 07763 528 345.