Government outlines changes to allow councils to buy land for affordable housing at a lower rate
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The government has published its proposals for changing compulsory purchase order (CPO) powers to allow councils to buy land for affordable housing development at a lower price.CPOs can be used by the public sector to procure land for development in the public interestIn a consultation paper today, the Ministry of Housing, Communities and Local Government set out plans aimed at making it easier for councils, combined authorities and other bodies, including Homes England, to buy vacant land from landowners.Under the proposals, public bodies will not have to pay hope value costs which include an estimate of what the land could be worth if developed on in the future if the development is in the public interest.The previous governments Levelling Up and Regeneration Act brought in a power for directions to be included in CPOs to remove hope value from calculations of compensation to the landowners.The Labour government is now proposing expanding this further to allow CPOs to be made on behalf of town and community councils by local authorities to remove hope value where they schemes are facilitating affordable or social housing.The paper said the governments engagement with town councils has indicated there is scope for an increased use of CPOs on their behalf to enable small schemes where back-to-back agreements could be arranged with registered providers of affordable housing.Matthew Pennycook, housing minister, said:In our manifesto, we committed ourselves to further compulsory purchase reform to deliver more housing, infrastructure, amenity, and transport benefits in the public interest.>>See also:Updated National Planning Policy Framework explainedThe consultation we are launching today is the next step in fulfilling that commitment proposing reforms that will make the process faster and more efficient, enabling more land value to be captured and then invested in schemes for public benefit.The consultation will run into 13 February.The government also announced in a separate consultation that it will remove the New Homes Bonus in its current format after 2025/26.The bonus is paid to councils as an incentive to ensure delivery of housing in their areas, however it has faced criticism for not being allocated according to need.A brief history of compulsory purchase and hope valueCompulsory purchase powers in the UK date back to the Lands Clauses Consolidation Act of 1845, which established a legal framework for acquiring private land for public infrastructure projects, such as railways and canals. These powers allowed authorities to override landowner objections in the interest of delivering essential public works. While the framework evolved over the years, the 1947 Town and Country Planning Act marked a turning point, embedding compulsory purchase within a modern planning system and enabling large-scale developments, such as new towns.Source: ShutterstockThe 1947 Town and Country Planning Act enabled public sector development corporations to purchase agricultural land without the uplift of hope value, facilitating the creation of new towns such as StevenageIn the UK, a Compulsory Purchase Order (CPO) is a legal tool that allows public authorities, or bodies acting on their behalf, to acquire land or property without the consent of the owner when it is deemed necessary for a project that serves the public interest. CPOs are typically used for developments such as infrastructure projects, regeneration schemes, housing developments, or other initiatives that deliver clear public benefits.The process is governed by legislation, including the Acquisition of Land Act 1981 and various acts specific to the type of development, such as the Highways Act 1980 or the Housing and Planning Act 2016. Before a CPO is granted, the acquiring authority must demonstrate that the acquisition is essential for the proposed scheme, that the scheme is viable, and that it balances the public benefit against the impact on affected landowners. Landowners are entitled to fair compensation, which typically reflects the market value of the property in a hypothetical no-scheme world, as well as additional costs and losses incurred due to the acquisition.The 1947 Act established a fundamental principle of the UK planning system: landowners were not entitled to compensation for potential development value if planning permission was refused. This no-compensation rule ensured that local authorities could exercise planning powers without the risk of crippling liabilities to landowners whose schemes were turned down. Crucially, it enabled post-war new town corporations to acquire agricultural land without significant value uplifts, facilitating large-scale development at manageable costs.Source: ShutterstockCPOs were extensively used to acquire land along the route of the HS2 rail projectIn 1959, this system was altered by a Conservative government responding to concerns from landowners. The Town and Country Planning Act 1959 reinstated compensation awards based on market value after a 12-year period during which public authorities had been able to acquire land at existing use value. The Act introduced the principle of the no-scheme world, ensuring that compensation excluded any increase in value arising from the proposed public scheme. At the same time, however, it enshrined landowners rights to compensation for the loss of prospective planning permissions that might have been granted in the absence of the public acquisition. This recognised the concept of hope value the additional worth of land based on its potential for future development and marked a significant shift in the balance between public benefit and private gain.In 1974, a Court of Appeal ruling reinforced landowners rights to hope value, requiring public authorities to compensate for potential future development value in compulsory purchases. This decision significantly increased acquisition costs for public sector projects, making large-scale developments, such as affordable housing, more expensive and less viable.In recent years, the application of hope value has come under scrutiny due to its impact on public sector land acquisitions. Critics argue that compensating for speculative future value inflated costs for public projects, hindering the delivery of affordable housing and infrastructure. The Levelling Up and Regeneration Act 2023 introduced reforms to cap or remove hope value in specific cases, such as for affordable housing, enabling authorities to acquire land at lower costs. These changes, implemented in 2024, aimed to rebalance the system and make public land acquisitions more viable while addressing the long-standing tension between private gain and public benefit.
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