Compulsory Purchase In Focus: The Role of Acquiring Authorities in Delivering New Homes

With the government’s housing targets clearly set out, a new NPPF published, and the Planning and Infrastructure Bill now launched, the focus on delivering new homes and infrastructure at pace is clear.

In particular, one important point within these changes in CPO law may help Acquiring Authorities unlock major, strategic residential development required to achieve this delivery of new homes and infrastructure.

Back in 2023, one significant change within the Levelling Up and Regeneration Act (LURA) was the new opportunity afforded to Acquiring Authorities to apply the new Section 14a of the Land Compensation Act 1961 when making a CPO. This provision allows Acquiring Authorities to seek a direction to disregard ‘Hope Value’ when assessing compensation for the compulsory acquisition of land for affordable housing development and certain other limited forms of development, including new healthcare and education facilities.

The willingness of the Secretary of State to approve Section 14a applications, and the extent of affordable housing required to justify them, has yet to be tested by an Acquiring Authority.

If applied, the benefits for Acquiring Authorities in the assessment of compensation and future development of land are clear. With compensation only to be awarded on the basis of the Existing Use Value (including any planning applications already granted), Acquiring Authorities can secure land below what may be considered its market value. While other heads of claim and the costs of implementing a Compulsory Purchase Order must be considered, for large, strategic, complex schemes, this reduction in land acquisition costs could help allay viability concerns.

A further point to note is that the guidance suggests schemes do not need to be exclusively for affordable housing to benefit from a Section 14a direction. The extent of affordable housing required to qualify for a Section 14a direction has yet to be tested with the Secretary of State; however, it could be expected that a 50% threshold will serve as a benchmark for approval, albeit subject to viability considerations.

The desirability of a Section 14a application will need to be weighed up against the likely cost of additional challenge and scrutiny as part of the CPO process, but day-to-day, it could lead to a reduction in long and costly compensation negotiations around the future development prospects of acquired land in the ‘No Scheme World’.

If Acquiring Authorities start to pursue and are successful in obtaining Section 14a directions on a regular basis, it could have an interesting impact on negotiations with landowners in the shadow of CPO. It is feasible that the threat of disregarding Hope Value could increase the number of private treaty deals prior to a CPO and reduce the risk of Acquiring Authorities having to implement the CPO process to acquire land.

Landowners will understandably be concerned about these implications. The Compensation Code, and specifically the Land Compensation Act 1961, was designed with the general principle of “Financial Equivalence”, including an assessment of development/Hope Value where it genuinely exists, in mind. Artificially suppressing market value for its existing uses will only be seen as a departure from this. Landowners are likely to strongly object to Section 14a applications on the basis that the disregard of Hope Value will not be proportionate and justified in the public interest, and it will be interesting to see how successful these objections prove to be.

Meanwhile, Acquiring Authorities will need to be cognisant of the risks that could accompany an application for a direction for Section 14a. Understandably, such directions will be unpopular with landowners, and we expect that opposition to any relevant CPO will be heightened. Acquiring Authorities will have to expect a greater level of challenge and, justifiably, more scrutiny on their case that the underlying scheme is in the public interest.

The next step is for Acquiring Authorities to gain confidence in using these enhanced powers and for the principles above to be tested. Since the LURA provisions came into force, we are not aware of any Acquiring Authority making an application to disregard Hope Value for compensation purposes. Until an application is made, we will not understand the willingness of the Secretary of State to grant a Section 14a application and the level of affordable housing required to satisfy them that disregarding Hope Value is in the public interest.

The extent to which this power might be applied to the delivery of housing and whether its use is proportionate to the public interest is likely to be a highly debated and litigated question.

One thing that has not been clear within the CPO Guidance accompanying LURA is whether Acquiring Authorities are expected to be the party that delivers these schemes that benefit from Section 14a provisions rather than private developers – or indeed whether delivery by public-private partnerships would be considered reasonable. Landowners will rightly question whether the acquisition of their land at Existing Use Value only will be justified if private developers are to profit as a result. The balance of viability and developer profit will be a difficult one to strike in these scenarios, but one which will need to be addressed.

The large-scale New Town developments may be an example of where the use of Section 14a directions might be appropriate, with proposals intended to deliver at scale, likely to involve multiple landowners, schemes requiring complex infrastructure delivery and unlikely to be viable without public sector intervention and funding.

At a smaller scale, in previously developed or Grey Belt areas that are proximate to existing settlements, Section 14a has the potential to distort market pricing in a way that many will regard as manifestly unfair. This is particularly so in respect of sites that currently have, or are in the process of securing, allocations through the Local Plan making process.

In order to meet their housing targets, local authorities should look at these revamped powers as an opportunity to help unlock substantial housing schemes, particularly those within multiple ownerships and/or that have underlying viability challenges. Other Acquiring Authorities, such as Homes England, should also be viewing them as opportunities to unlock stalled schemes and develop new partnership approaches.

With these powers afforded to them, Acquiring Authorities should not see land assembly as an impediment to delivery but an opportunity. The key will now be how willing and prepared they are to use the powers at their disposal and their ability to justify the public benefit of schemes in the face of heightened scrutiny and opposition.

This is part two of a five-part series named “Compulsory Purchase in Focus”. Read part one here, and keep an eye out for part three on our LinkedIn page and website tomorrow.