• Issue 40

  • Sep 2018

The Source

Landowners Will Always Seek Higher Value Based On Hope

The HCLG Committee has published its report into land value capture, exploring the options for local and national government to realise a greater share of the uplift in land value when residential planning permission is achieved.

The report makes the following observations and recommendations:

There is scope for central and local government to claim a greater proportion of land value increases through reforms to existing taxes and charges, improvements to compulsory purchase powers, or through new mechanisms of land value capture. The report goes on to recommend simplifying the CPO process to expedite and reduce the cost. In scenarios where a governmental body already owns the land, the report recommends “additional resources, training and advice” to ensure local planning authorities “are able to negotiate robustly with developers to get the maximum value for land”. This final recommendation shows a misunderstanding of the role that LPAs play in selling Council-owned land to developers. Nonetheless, recent announcements indicate that Homes England has taken on this recommendation immediately and is considering changing how it undertakes the disposal of public land.

Whilst a housing allocation in an adopted plan is potentially as valuable as a planning permission, the committee ignores this option for Councils to benefit from land value rises and instead emphasises the necessity of local authorities having up-to-date local plans containing clear objectives and requirements so as to reduce the speculative land value of possible future planning permissions; presumably to keep house prices down.

Clive Betts MP, chair of the HCLG Committee, said: “There is a growing consensus that the Land Compensation Act 1961 requires reform. The present right of landowners to receive ‘hope value’ is distorting land prices, encouraging land speculation and reducing revenues that could be used for affordable housing, infrastructure and local services.

The CLA’s Director of Policy and Advice, Christopher Price, representing landowners, farmers and rural businesses said: “We are frustrated that the committee has recommended the removal of hope value. The principles of fair compensation are that any price should reflect the value of the land if it was to be sold on the open market. It is iniquitous to ignore the fact that the price paid for land with development potential should be higher than land with no development value whatsoever.”

The CLA also commented that these reforms would remove the incentive for landowners to bring land forward for development, arguing that landowners and the development sector already contribute significant sums of money to local communities which pay for affordable housing and social infrastructure.

Nonetheless, the housing minister, Kit Malthouse indicated to the same committee in early September that his department intended to await the impact of changes to the system set out in the Neighbourhood Planning Act 2017 before considering any new legislation. The existing mechanisms of s106 and CIL to capture land value therefore look set to continue for the foreseeable future, despite the 2017 Conservative Party manifesto pledge to “capture the increase in land value created” when developers build, in a way that makes it “more certain” that the public sector and communities benefit from any uplift.