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CPO’s Encouraging Build Outs

Simon Dimmick

Further to the previous two blogs on the gap between planning permissions granted and the rate of build out, Simon Dimmick, Partner in our Planning & Environmental Law team, looks at possible reforms to the Compulsory Purchase regime as a way to close this gap.

What is compulsory purchase?

Compulsory purchase is a regime by which local authorities (among other governmental bodies) have the power to purchase your property without your consent. Where these powers are exercised, the landowner is generally entitled to compensation.  The rules for compensation are complex however in some circumstances landowners can obtain an additional value for their land known as the “hope value”. This value represents the increase in land value attributable to the possibility that the land might obtain planning permission.

The proposal

The Local Government Association has called for local authorities to be granted new powers which would enable them to use compulsory purchase orders to acquire land which has been earmarked for development but remain undeveloped for a period of time.

The Labour Party has also made calls for changes to be made to the regime whereby local authorities would be able to purchase land from private landowners and developers at a value closer to the base value of the land without account being made for the “hope” value. With local authority finances continuing to be squeezed any saving on purchase prices is obviously going to be welcomed.  

Conversely, the former Housing Secretary Sajid Javid has indicated that Homes England should use existing compulsory purchase powers to speed new developments up.

Would the proposals help?

Any increase in CPO use or reforming compensation arrangements may well encourage developers to complete developments more quickly as the fear of land being compulsory purchased by the local authority for any undue delay and therefore a potential loss on their investment may well be a strong incentive. However, there is the danger that the quality of dwellings could be adversely impacted by developers rushing to complete homes and therefore a balance would need to be struck and a sensible/reasonable timeframe within which a developer can complete a development would need to be agreed. The difficulty with this is that the ability of developers to complete their developments will be contingent on factors outside of their control such as improved infrastructure off site so as to support development by the local authority and contractor and material costs.

However, the compulsory purchase regime is not quick and can take between 12-18 months for confirmation of an order to be given. Therefore, without reform to the entire existing legal framework (rather than limiting reform to compensation) it is debatable whether encouraging local authorities to make use of their CPO powers would in fact speed up the build out. This is particularly so as once the land has been acquired by the local authority they will need to somehow fund the build out itself or otherwise seek third party developers to continue the housebuilding. It is unlikely that local authorities could compete with private developers in terms of housebuilding rates given existing restrictions on local authority borrowing. The actual result could therefore be that the rate of housebuilding would slow and therefore the gap could grow.  

For more information, please contact a member of our Planning and Environmental Law team.

This blog article was produced with support from Kayleigh Chapman.

This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.