Councils have warned that offices left empty by the coronavirus pandemic must not be turned into sub-standard “rabbit hutch” homes, after a government climbdown indicated a shift in housebuilding targets away from the southern shires and toward towns and cities. Thousands more homes are set to be built in urban areas, particularly in the Midlands and north of England after the government said it would adjust a housing targets algorithm that had sparked a rebellion from MPs and council leaders representing Conservative heartlands. Targets in areas such as Hampshire and Surrey were increased significantly, and now the Ministry of Housing, Communities & Local Government (MHCLG) reportedly wants to make the system “fairer”. The move has raised fresh fears about the standard of housing that may result. Officials plan to use the new strategy to reshape town and city centres hit hard by the pandemic, repurposing some vacant offices and shops as homes. “We have opposed the algorithm on the basis housing has to be built where it is needed and councils are best placed to decide,” said David Renard, the Local Government Association’s housing spokesman. “It is helpful to focus on towns and city centres as we know retail is shrinking and we need to repurpose these places. At a high level this could be a good policy, but converting offices into poor-quality housing isn’t something we want to see.” Planning rules currently allow builders to turn offices into homes without planning permission, which has led to some cramped developments with tiny flats – sometimes with almost no natural light. Martin Tett, the leader of Buckinghamshire county council, said the permitted development right (PDR) must be scrapped in order to guarantee “decent” homes. “You can convert these [office blocks] into what have been described as ‘rabbit hutches’, so we need to get rid of the PDR and make everything subject to planning permission,” he said. The move to “rebalance” housing targets comes after a rebellion by Conservative county councils and backbenchers, including the former prime minister Theresa May and the former health secretary Jeremy Hunt. Bob Seely, the Isle of Wight MP, told parliament: “The biggest housing increases will be to rural shires and suburbs, and the biggest falls are in the urban north and Midlands.” The MHCLG confirmed the change, first reported in the Sunday Telegraph, which will lead to targets being adjusted to create a “fairer formula”. The move stops short of meeting demands from councils for the government to abandon the algorithm altogether and allow local areas to determine their own housing targets according to need. Andrew Howard, the managing director at the planning consultant BECG, said: “A U-turn now is better than the dead-end algorithm that so upset Tory heartlands. It was a poorly judged, quick-fix solution to a long-term problem. “The government needs to stop digging and take the time to reconsider this in the light of responses to the planning white paper. We need a home-building policy that delivers for the shires and our urban areas and also helps town centres and high streets that have been devastated by Covid.” There has been widespread anger at the government’s planning reforms, which also propose to reduce local decision-making on individual development proposals. The planning white paper sets out to give local people and politicians a say over strategic plans, but after that developers will be free to build. It also makes it easier for open land not currently protected as green belt, a national park or an area of outstanding natural beauty to be built over.