An Englishman's home is his office

Once it would have been called "living above the shop". Now, most notably in certain areas of London, but also in cities such as Manchester, Nottingham and Leeds, it has become a modish development concept: live/work.

Over the past 15 years, live/work has been increasingly taken up as a way of life by designers, artists, media people and consultants in businesses which are relatively "clean".

Buying a live/work property is not about putting a desk in the spare room and working from home. Local authorities approve live/work developments in circumstances where they would not otherwise give solely residential planning permission because they see it as a way to encourage urban regeneration and provide jobs. It is a solution for self-employed people whose work may disturb neighbours, or for small businesses where the proprietor will hopefully provide employment, but can also live on the premises.

Demand for these spaces is very specific and prices per square foot tend to be much lower than would be the case for straight residential property. However, this is not a cheap way to get a home in a trendy area; don't even think about putting bedrooms in the designated work space. The Universal Business Rate (UBR) will apply on an agreed proportion of the property and the local authority may inspect at any time to ensure the contractual obligation to maintain a business is being fulfilled.

It is particularly popular as a regeneration concept in the capital's inner boroughs. But it is catching on in other areas, despite the complications of ratios of living to working space and of the Council Tax to UBR.

Live/work seems to have had its genesis in the early 1980s, in Greenwich in south-east London, on what Fritz Henning, the general manager of the local council's development department, describes as "a small riverside site" - a scrapyard, in fact.

"Nobody wanted the yard, at Vaizey's Wharf, but someone wanted to put up luxury homes. As the council wanted people to live and work there, the answer was a small private development of what were called 'work-homes', with two floors for living and a garage/workshop/ storage space underneath."

Although they had been designated for mixed use, "the idea proved a success," says Mr Henning. On the market now, he reckons these live/work units would fetch pounds 150,000 at least.

In the mid-1980s, Greenwich applied the live/work concept again, to a scheme in the town centre. "Because the whole trend was then towards out- of-town development, no one was queuing up to provide comprehensive investment," says Mr Henning. "So we had to go about it piecemeal, putting together a package reflecting the council's concerns to provide work and create something of value for the community."

With living and work spaces on separate floors, taxable separately, the 20 work-homes in Burney Street are worth more than pounds 250,000 each, and on average have five people working in them, including employees who live elsewhere. As such, Mr Henning emphasises, they are quite different from conventional homes, domestically rated and used by individual occupants for what, in planning language, is called "homeworking".

Sometimes called "ateliers", some have appeared further up the river at Southwark andWandsworth, where Plantation Wharf was one of the earliest. But most have been on the fringes of the City in Clerkenwell, Hackney, Islington and Shoreditch where, as a result of closures of workshops and factories, there is plenty of the right sort of space.

Theoretically, where the entire space is on one floor, what live/work implies is an area for each, defined on the floor-plan with a dotted line "In practice", says Philip Jackson, residential director of Clerkenwell estate agents Stirling Ackroyd, "the line will tend to get blurred because live/work especially suits people who have deadlines, do not want to rent space down the road and literally live their work - like photographers, fashion designers and publishers."

Because of the space available in less congested surroundings at comparatively low prices, such people have tended to move north or east from central London. Properties can range from pounds 97,500 freehold, in London E2, and pounds 107,500 in Holloway, to more than pounds 400,000 in Shore-ditch. Mr Jackson puts the optimum size of work space at 500 to 1,000 sq ft.

Having said that, he refers to Melbray Mews, a development new on his books and towards the south-west, in Fulham, where the biggest of seven live/work units is more than 3,000 sq ft, split 50:50 and priced at pounds 450,000.

Which, in price and location, shows how far the live/work concept has come since 1986 when Jonathan Meadows and his partner Kate Stephens found the space they wanted in what had once been a furniture factory in Hoxton Square, Hackney. With the friends who helped them self-finance the conversion, they formed a management company, asked an architect to oversee the project and then divided the building into flats on each of the upper floors and work/studio space on the ground and basement levels.

They were initially granted "ancillary residential permission". But, says Mr Meadows, who is an artist, "since then the rules have changed in Hackney, so we've all reapplied and been granted permission for live/work." That is the rub: in Hackney, as in Islington, the rules governing live/work are strict and their councils are not generous with variations.

In other words, you may be able to buy for less than a residential price, as long as you qualify, or can find a mortgage lender unfazed by the mixed use, but by the same token, you will almost certainly have to sell for less, and you may well have to wait longer to sell, like Mr Meadows and Ms Stephens. They have put their 1,400 sq ft of living space and 700 sq ft of studio on the market at pounds 350,000, but have been waiting five months.