"The use of compulsory purchase to acquire land for housing is not new: compulsory purchase orders (which are more usually reserved for large-scale infrastructure schemes) have previously been used successfully to facilitate development"
- Lawrence Turner - Boyer
Earlier this year, the then Department for Levelling Up, Housing and Communities (DLUHC) gave councils new powers to buy land more cheaply in a bid to support the delivery of more social and affordable housing. The change, which allows councils to buy land for development through compulsory purchase orders (CPOs), removes ‘hope value’ costs which otherwise benefit the profitability of the sale for both the landlord and the developer.
This aspect of the Levelling Up and Regeneration Act (LURA), which has tended to be overshadowed by other, more headline-grabbing policies, is in fact not new as a policy proposal.
The Labour Party made a similar announcement in June last year – a suggestion which met with concern from the property industry.
At the time, the British Property Federation raised the issue of protracted legal challenges and the risk of regeneration schemes being delayed or not progressing. It stated that any incoming government would be unable to deliver such a policy in its first term
Similarly, the National Federation of Builders raised concerns about changes to land use which may not be compatible with broader development plans.
The National Housing Federation, on the other hand, saw potential benefits in diverting “landowner profits into desperately needed new social housing and community infrastructure,” which, it said, could only be achieved through a reduction in land values across the market. This, of course, could come at the detriment of many sectors of the property industry.
Now in government, Labour has formally announced to, “Further reform compulsory purchase compensation rules to improve land assembly, speed up site delivery, and deliver housing, infrastructure, amenity, and transport benefits in the public interest. We will take steps to ensure that for specific types of development schemes, landowners are awarded fair compensation rather than inflated prices based on the prospect of planning permission”.
The enactment of the CPO regulations within the LURA earlier this year broadened CPO powers for local authorities and Homes England by allowing the removal of hope value.
However, the rules still require an authority to apply to the Secretary of State to demonstrate that the removal of hope value is in the public interest. This leaves local authorities with uncertainty as to what development would be in the public interest, and ultimately whether their application will be approved by the Secretary of State.
By comparison, Labour has committed to legislate so that public bodies can use CPO powers to acquire land without the need for individual approvals by a Secretary of State, effectively removing this area of uncertainty.
The use of compulsory purchase to acquire land for housing is not new: compulsory purchase orders (which are more usually reserved for large-scale infrastructure schemes) have previously been used successfully to facilitate development.
Examples include the ongoing major regeneration of Leicester’s Waterside which will deliver 500 new homes along with office and retail space; the development of derelict land on the edge of Sheffield city centre for a mix of new homes, offices, retail, leisure and a hotel; the acquisition of an empty supermarket and a terrace of empty shops in Wellingborough to pave the way for housing development and the development of new housing in Helmsley, North Yorkshire that had been stalled by the former landowner.
So there are some success stories, but at what cost?
My main concern is that, even with the promised changes to legislation, CPO can be an ineffective, time-consuming and costly process; and many local authorities will lack the resources to implement it.
The CPO process frequently involves negotiations with multiple landowners, legal challenges, and delays. Landowners may choose to challenge decisions through judicial review, further prolonging the process. As such, it is far from the quick and efficient means of unlocking land for new development which is needed.
Even if effective, CPOs are just one piece of the puzzle when it comes to delivering new homes.
The wider planning system in the UK is excruciatingly slow and bureaucratic, with Local Plans and planning applications often taking years to complete and the intrinsic problems that have led to this situation must also be addressed.
Other complications typically involve protracted negotiations with owners, legal challenges and extensive public consultation and paperwork. I have seen instances in Bristol, where I am based, where CPOs have taken more than 20 years on some sites. Unfortunately, this policy doesn’t have the potential to deliver the homes as quickly or as cheaply as the headlines suggest.
We need to see a more holistic approach to addressing the housing crisis, including reforms to the planning system, providing support to councils, reviewing the Green Belt and delivering new homes in both sustainable brown and greenfield locations.
The new government looks set on addressing some of these challenges, but we would caution against rapid reform for rapid reform’s sake: any changes must be carefully considered from all points of view and this includes comprehensive consultation with the wider property industry.
