The phrases “warehouse living” and “home office” might take on a whole new meaning if the UK government gets its way. Offices, launderettes and industrial units could all become places to live in according to the government’s latest solution to the housing crisis, heralded as another “planning shakeup” to breathe life into unused buildings.

But in a bid to solve one crisis, the new housing and planning bill is paving the way for another. Critics fear it will simply accelerate the hollowing out of London, speeding up the process of suburbanisation that is fast leaving the capital with no affordable places to work.

“Very soon we will wake up and realise we have two crises on our hands,” says Mark Brearley, professor at the Cass Cities unit of London Metropolitan University. “People understand the seemingly insoluble problem that we can’t produce enough housing, but now it’s being joined by the fact that space for London’s economic and civic life is being relentlessly squeezed out.”

The proposed change in legislation will extend “permitted development” rights, allowing offices and light-industrial buildings to be converted into housing without the need for planning permission nor the usual obligations to provide affordable housing. First introduced as a temporary measure in 2013 to give housebuilding numbers a quick boost, and originally due to expire in May 2016, the new legislation would see the rule made permanent. Given that a building can be worth three times more as housing than as an office, many fear it will lead to wholesale evictions of small businesses and the loss of workspace, with London and the south-east facing the brunt, where house prices are so high.

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The Tory policy has faced a barrage of criticism from even its usual allies. Conservative-led Richmond says it has lost 24% of its office space as a result of the rule. Its council leader, Lord True, has come out vociferously against the proposed legislation. “Yet again Whitehall dogmatists have failed to listen to local people and their elected representatives,” he says. “We have seen businesses forced out of their premises by hard-faced men in search of a quick buck and the first flight to the Bahamas. Voluntary bodies, who so often rent unused office space, lose out as well. That is a disgrace.”

By further relaxing planning rules in the aim of “removing red tape”, the government has again got the wrong target in its sights. There are currently existing permissions for around 270,000 homes that developers are just sitting on.

“What about some real radical thinking,” Lord True says, “like a right for local councils to require developers sitting on land banks to get on with the job? Or a right for local councils to apply for and execute development on brown land held by dozy government departments and obstructionist public bodies?”

The sad reality is that the government will only take notice once the suffocation of London’s dynamic, plural economy – the thing that makes it so successful – is finally complete, once the space it needs to thrive has been utterly hounded from the city. By that time, it will be too late.