Proposed changes to compulsory purchase compensation in England and Wales will see landowners forced to sell their land for below market value to facilitate new development.
The consultation proposes changes to the compulsory purchase system in the name of aiding public sector development including housing, regeneration and infrastructure, says Jeremy Moody, secretary and adviser to the Central Association of Agricultural Valuers. It will enable local authorities and other public sector acquirers to take land without necessarily paying for ‘hope value’ where there is already the opportunity for development.
Equivalence principle
“The principle of equivalence has long lain at the heart of compulsory purchase compensation,” says Mr Moody. “While sounding fair, its inbuilt downward pressure on price encourages resistance, delay and extra cost for projects, such that George Osborne advocated changing it seven years ago.” Then Chancellor of the Exchequer, Mr Osborne said: “If you pay people a little more you’d get planning a little quicker and the whole process could cost less.”
However, the Government is now proposing the opposite – so that there would be one price when land is sold in the open market and another lower one when it is taken by compulsory purchase. “History shows that such a two-tier market will be seen as unfair and leads to difficulty and complexity,” says Mr Moody.
The Levelling Up and Regeneration Bill would allow ‘public sector entities’ to ask the Government for authority to cap compensation at existing use value. The consultation proposes to go even further, by capping or removing hope value either for compulsory purchase generally or in relation to specific types of schemes. It argues that a ‘fair’ price would aid the viability of the scheme. “But it opens the door to paying less than market value for property taken by a public sector body.”
Infrastructure levy
Other measures in the Bill include the Infrastructure Levy, changes to local plans, and the creation of locally-led development corporations. Suppressing land value in this way could be part of a drive for new settlements with land taken for that new housing at less than its possible market value.
But as the consultation opened on 6 June and closes on 19 July, it leaves only a narrow window in which representations can be made, warns Mr Moody.
“The question is whether policy makers, who are almost never on the receiving end of compulsory purchase, either understand or care about property rights and their powerful role in the economy, for businesses, families, and as an enabler of investment.”
This proposal is not alone. Other Government Bills in Parliament would further weaken landowners’ rights and degrade value under the Electronic Communications Code, even though the 2017 Code has created resistance, cost, delays and 100 times more litigation.
There are also plans to repeal no-fault notices for shorthold tenancies, making them significantly less attractive to landlords. “This sector has already lost 250,000 dwellings (6%) since 2019 with increasing fiscal and legislative pressure,” says Mr Moody. “Such a trend removes the opportunity to rent, which is often scarce in rural areas, and drives rents up further.
“Where policies make property a plaything, distort markets and focus on symptoms, not causes, that weakens the economy and stores problems for the future.”
