Compulsory Purchase Process & Compensation Reforms
Boris White
Jan, 22 2025As we were logging off for Christmas, the government gifted us with a consultation setting out the Government’s Compulsory Purchase Process and Compensation Reforms.
The government is considering introducing a general power to enable the Secretary of State to remove hope value from the assessment of compensation for the following categories:
- Brownfield land in built-up areas suitable for housing but with no extant planning permission for residential development
- Land allocated for residential development in local plans, but which has not come forward for development
Although this is a consultation this government has pre-warned us of this well in advance, so it is likely something they will want to push forward with, despite the criticism.
There were also a number of other technical reforms with the most notable one being in favour of occupiers over investors in Loss Payment reforms. No more discretionary home loss payments for non-compliant property owners facing compulsory purchase.
So why is the government doing this? Their aim is to streamline the process of concluding infrastructure schemes and reducing costs. Especially with the reform on hope value, it also seems to be targeting ‘land banking’ – the concept that landowners delay development on land with planning permission in the hope of improved future market conditions. The claims of land banking delaying delivery of housing are contested by many, but there is evidence of many infrastructure schemes (HS2 being the most obvious one) being delivered not on time and not on budget, and therefore clearly the system isn’t working.
These reforms on hope value become worrying for strategic land, which typically takes years to be promoted through the local planning process. Ceres Property’s Development Team deals with numerous freehold sales of speculative sites with the hope that one day they will be developed into a more financially valuable use. Boris White, a Partner in our Development Teams says:
“If these reforms on hope value come into force, we believe that the premiums currently paid for substantial hope value for long term strategic land will reduce significantly. This will be more acute if there is no reimbursement of monies spent in promoting sites – it can cost hundreds of thousands of pounds to get the site allocated in a Local Plan. We fear that the knock-on effect of this will be worse than any accusation of ‘land banking’ as it disincentivises speculative planning promotion.”
Compensation for compulsory purchase order (CPO) schemes are commonly riddled with contention and Peter Cole, a Partner in our Land Consultancy Team who specialises in infrastructure schemes explains that: “Removing the concept of hope value in certain cases feels like the government is poking a hornets’ nest that is already on fire. The process of your land/home/business being affected by a scheme using CPO powers is already a very emotional and stressful time for claimants. Although there is definitely a need for more infrastructure that is delivered on time and on budget, are we leaning too far to one side – claimants must be able to receive what is fair.”
Compulsory purchase is always presented as the need for vital infrastructure for the ‘greater good’, but will this reform really be for the greater good in the long run?
We expect to see additional CPO reforms as part of the Planning and Infrastructure Bill, details of which are expected early 2025, so watch this space.