Lawrence Turner, director of Boyer, discusses the new powers for councils to use compulsory purchase orders to acquire land for affordable housing and notes that these changes will take effect regardless of the election outcome
Earlier this year, the 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
The suggestion caused concern in 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.
The Labour Party aims to deliver the biggest increase in social housing
Labour’s proposals were reiterated once again in its general election manifesto as part of an aspiration to: “Deliver the biggest increase in social and affordable housebuilding in a generation.”
The Party pledged 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.”
Whilst the Liberal Democrats touched on compulsory purchase reform in their manifesto, Labour’s statement was the most explicit.
Is the removal of hope value in the public interest?
The enactment of the COP regulations of LURA at the end of April broadened CPO powers for local authorities and Homes England by allowing the removal of hope value.
However, the new 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 uncertain about what development would be in the public interest and, ultimately, whether the Secretary of State will approve their application.
By comparison, Labour’s latest manifesto commitment states that they will 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 and the development of derelict land on the edge of Sheffield city centre for a mix of new homes, offices, retail, leisure and a hotel.
In addition, the acquisition of an empty supermarket and a terrace of empty shops in Wellingborough paved the way for housing development, including new housing in Helmsley, North Yorkshire, that had been stalled by the former landowner.
So, there are some success stories, but at what cost?
Compulsory purchase orders can be ineffective and time-consuming
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.
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, support for councils, review of the Green Belt, and delivery of new homes in both sustainable brownfield and greenfield locations.
A future Labour 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.
