Share this page

Fresh look at land compensation could help deliver 3m homes

15 January 2019 • Julie Loggenberg

This month’s landmark report from Shelter’s Social Housing Commission called for three million new social homes to be built by 2040, and in doing so has highlighted again the potential for amending existing legislation to facilitate development and investment in new affordable housing.

Rather than bringing in a raft of ‘new’ powers, which may just end up being an exercise in reinventing the wheel, there is an argument that taking a fresh look at how we could change CPO powers and the Land Compensation Act 1961 may help more developments get off the ground.

The key issue: compensation

The key issue here is how landowners are compensated if land is acquired by a local authority or other relevant delivery body to facilitate housing development and/or supporting infrastructure.

Under the Land Compensation Act, landowners are able to hold out for unaffordable land values based on ‘hope values’ (the value being based on the open market value of the land, but with a hypothetical uplift which takes into account the prospect of the land having planning post acquisition – a sort of built-in overage) thereby making this route unattractive and not viable in many cases, potentially preventing development.

The call is being made for this right to claim the hope value to be removed from the legislation, making land cheaper. The changes would not mean that the land was worth less than the open market value, just that the expectation of an automatic hike on top of this would be removed.

Of course, how you view this depends upon which side of the fence you are on – the landowner would argue that they were entitled to receive a return on their asset.

CPO: an unwieldy and costly system

Similarly, many local authorities are very reluctant to use CPO powers to unlock sites and to provide the infrastructure necessary to increase housing supply. The process is deemed to be simply too unwieldy, too costly, and usually too controversial.

In addition, the present system of compensation is not popular with landowners and owner occupiers, particularly in low value areas, who feel significantly prejudiced by the system of valuation, which compensates based on what has been lost and not the price of replacing with an equivalent property. Indeed, this issue is at the crux of property owners’ concerns over HS2.

Changes to the CPO regime have been included in the Housing and Planning Act 2016 and the Neighbourhood Planning Act 2017 in an attempt to make this process faster, clearer and fairer for all, but most local authorities feel these didn’t go far enough and have failed to address some of the fundamental problems.

Paralysis may well prevent progress

Back in 2017, in its response to the consultation on the White Paper, the Royal institute of Town Planners had commented that it was “disappointed that there was no mention about improving the land value capture mechanism” included in the Government’s proposals.

The debate has been further played out in the House of Commons Select Committee for Communities and Local Government when it recently considered evidence capturing large uplifts in land values. Whilst the Committee had not sought to recommend actual reform to specific legislation, they were “struck by the number of submissions that highlighted this as being central to any reform of land value capture”.

The Shelter recommendations have added their voice to the call for reform, but given the present paralysis in Parliament with regards anything other than Brexit, it may be a long time coming.

Women In Housing  Finalist
Chambers UK 2015
Conveyancing Quality
Legal 500
Investors in People

Croftons is the trading name of Croftons Solicitors LLP, a limited liability partnership registered in England and Wales with number OC343375. The term ‘partner’, if used, denotes a member of Croftons Solicitors LLP or a senior solicitor of Croftons Solicitors LLP with equivalent standing and qualifications. A full list of members is open to inspection at the office. Croftons is authorised and regulated by The Solicitors Regulation Authority (SRA) number 508041. Croftons has its principal place of business at The Lexicon, Mount Street, Manchester, M2 5FA.



© Croftons 2020 | All Rights Reserved

Scroll to Top