New law will allow compulsory purchase of land for affordable homes at existing use value
Developers have criticised government proposals for a major change to the way that the compulsory purchase system works, under which councils will be able to forcibly acquire land at its existing use value.
An amendment to the Levelling Up and Regeneration Bill tabled by junior minister Baroness Scott in the Lords proposes that “in certain cases involving affordable housing, health or education”, ministers will be able to approve Compulsory Purchase Orders (CPOs) without paying the landowner any “hope” value that it might receive a development permission.
Campaigners for new towns and affordable housing have long called for greater state powers to acquire land at lower values from developers as a way to help finance the construction of new communities, in the way New Towns were. However, commentators from the development community said the proposals were “ill thought through”, could pose a serious risk to regeneration schemes and “open a can of worms”.
Current CPO rules allow to compensate landowners for the “hope” value that their site might eventually get permission for an alternative use than the current one via a system whereby the local authority agrees a Certificate of Appropriate Alternative Development. This generally ensures a landowner receives a higher price than the existing use value of their land by allowing a proportion of the uplift which would be generated were full permission granted.
The Department for Levelling Up, Housing and Communities (DLUHC) has already last year consulted on limiting the payment of hope value under CPO, but these proposals appear to go much further.
According to an explanation of the new clause on the face of the bill, the proposal from the government “allows a Minister confirming a compulsory purchase order to direct, in certain cases involving affordable housing, health or education, that compensation should be assessed on the basis that no new planning permission would be granted for the land.”
This means that a landowner would receive simply the existing use value for the land, despite the fact the purchasing authority is intending to use it for development.
To make the order, the authority has to state the number of affordable homes to be created, and be satisfied that the direction is justified in the public interest. The explanatory note goes on to say that if the land is not subsequently used for the stated purpose, “the effect of the direction is reversed”.
Ian Barnett, national land director at Leaders Romans Group, said the proposal seemed odd because it was impossible to know whether planning permission would be granted for the land. He said: “It also raises questions about compensation for landowners and could open a can of worms and will inevitably give rise to legal challenges. This amendment, whilst well-intended appears ill thought through”.
David Baker, partner at QS firm Baker Rose Consultants, said in a LinkedIn post the proposal breached the long held assumption that landowners of land compulsorily acquired would be compensated at an open market value. He said: “Developers land assembling beware. This could pose a serious risk to investment made, not least in areas ripe for regeneration, if in the future, you can only recover the value of the existing, moribund use.
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