Compulsory purchase - compensation reforms: consultation outcome

Question 1

Foreword

Accepted Answer

1. The government’s high street strategy, Build Back Better High Streets, published in July 2021, emphasised the role of compulsory purchase as a catalyst for regeneration in town centres and high streets which are seeing persistent long-term empty properties, and where there are complex and fragmented land ownership patterns. The Levelling Up White Paper published in February 2022 made it clear that we want local communities to be empowered to take the lead and ensure they have the tools to succeed.

2. To facilitate this, we want to see a faster, more efficient compulsory purchase system which local authorities are confident in using and produces the right outcomes to bring forward much needed development including for housing, regeneration and infrastructure.

3. We are therefore bringing forward reforms in the Levelling Up and Regeneration Bill to streamline and modernise the process for compulsory purchase orders (CPO) and to give local authorities in England clearer enabling powers to use CPO for regeneration purposes. These measures are currently being considered by Parliament.

4. At the same time, we want to ensure schemes which need to rely on compulsory purchase are viable and deliver benefits in the public interest. We are proposing to make changes to the compensation provisions associated with compulsory purchase where valuation takes into account prospective planning permission.

5. As part of these compensation reforms, we sought views through the Compulsory purchase – compensation provisions: consultation on a proposal to allow acquiring authorities to request a direction from the Secretary of State which would cap hope value compensation payments at existing use value, or an amount above existing use value, where it could be shown that the public interest in doing so would be justified for a specific scheme. Currently, a landowner has 2 different ways of claiming hope value compensation either reflecting:

the prospect of a planning permission being granted on their land (section 14(2)(b) of the Land Compensation Act 1961); or
appropriate alternative development (AAD) for which planning permission may be assumed if AAD is established (section 14(3) and section 14(4) Land Compensation Act 1961).

The consultation sought evidence and examples of how paying closer to existing use value for land could be in the public interest. Views were also sought on whether the government should go further and look to cap or remove hope value generally or in relation to specific types of schemes.

6. We are grateful to everyone who responded to the consultation. We have carefully considered all of the responses and this document sets out a summary of the key points made and the government’s response.

Question 2

Summary of responses

Accepted Answer

7. Questions 1 and 2 of the consultation asked for the respondent’s details whilst questions 3 to 15 posed policy specific questions. The questions required one of the following responses: ‘Yes’, ‘No’, or ‘Not sure’. A statistical overview of responses to the questions, showing the nature of the responses, is presented below as part of the analysis to each question. Where respondents did not specify a particular answer, these were considered and recorded as ‘Not sure’. Where respondents provided comments and were clear in their views, but did not specify a particular answer, these responses were assigned either: ‘Yes (subject to comment)’, ‘No’, or ‘Not sure’.

8. There was a total of 127 responses from a range of interested parties from across the public and private sectors, as well as from the general public. The table below provides a breakdown of responses to the consultation by type of respondent.

Table 1: Number of consultation responses

Type of respondent	Number of responses
Community Organisation	1
County Council	3
Developer	11
District/borough Council	5
Individual	36
Landowner	8
Other	9
Other Public Sector	11
Professional Association/ Industry representative body	21
Professional Institute/Professional e.g. planner, consultant	17
Unitary Council	2
Voluntary/charitable sector	3
Total	127

Table 2: Consultation questions

Question Number	Question
Question 3	Do you agree that there are schemes where capping or removing the payment of hope value will increase the viability of certain schemes and/or increase the public benefits delivered through the schemes? Please provide details and where possible examples of schemes.
Question 4	Please provide any comments you may have as to the proportionality of capping or removing the payment of hope value balanced against the delivery of public benefits. Please provide any examples you have where you believe the public benefits would be such that it would be proportionate to impose such a cap or removal of hope value to a scheme.
Question 5	Do you have evidence of the extent to which hope value is currently claimed/paid generally in compulsory purchase situations? Please provide details and where possible any evidence that you have as to whether hope value is more likely to be paid on particular types of schemes, for example from urban regeneration schemes to greenfield schemes or from housing schemes to transport schemes.
Question 6	Do you think the public benefits of capping or removing hope value is more likely to arise in particular types of scheme? Do you think any solution to this issue should be limited to particular types of scheme or apply across all types of compulsory purchase situations? Please provide details in support of your answers.
Question 7	Do you agree with the proposal to address this through the issue of directions for specific schemes as set out in this consultation?
Question 8	Do you agree with the proposal that the directions could cap the payment of compensation at existing use value or at a percentage above existing use value (excluding the payment of compensation under other heads of claim)?
Question 9	Please provide any comments you may have as to: (1) whether it will be possible to identify certain, deliverable public benefits in applying for directions; (2) how it will be possible to link those public benefits to value captured.
Question 10	Do you think that an acquiring authority should have to consult with affected landowners before seeking a direction from the Secretary of State?
Question 11	Do you agree that issuing directions should only be to schemes where the acquiring authority is also a public sector entity?
Question 12	It might be possible for landowners to seek a planning permission so that development value applies under section 14(2)(a) LCA 1961 circumventing any cap applied under a direction. Do you think it should be possible for the directions to cap development value for any planning permission which falls under section 14(2)(a) where that planning permission is made after the “launch date” of the scheme or after the date the directions are issued if later? The launch date is defined by section 14(6) LCA 1961.
Question 13	Do you have any further comments as to how the process of seeking and issuing directions might work?
Question 14	Do you think the proposals should go further and automatically limit the payment of hope value in compulsory purchase more generally or in relation to specific types of schemes? Please provide details and justification as to why you think it would be in the public interest to go further and what public benefits could be delivered if hope value was limited. Examples of types of schemes, for example regeneration, you think any further general application should apply to would also be helpful.
Question 15	Do you have any comments on the initial equality analysis? If yes, please provide your views on the equality impacts arising from this proposal and any suggestions for how those impacts could be mitigated (please include any evidence you may have in support your views).

Question 3

Further reform

Accepted Answer

Question 3: Do you agree that there are schemes where capping or removing the payment of hope value will increase the viability of certain schemes and/or increase the public benefits delivered through the schemes? Please provide details and where possible examples of schemes.

Table 3: Statistical summary of responses to question 3

Organisation	Yes (subject to comment)	Yes	Not Sure	No	Total
Community Organisation	0	0	0	1	1
County Council	0	2	0	1	3
Developer	1	5	2	3	11
District/borough Council	0	3	1	1	5
Individual	0	3	24	9	36
Landowner	0	1	2	5	8
Other	1	2	4	2	9
Other Public Sector	1	10	0	0	11
Professional Association/ Industry representative body	2	6	0	5	21
Professional Institute/Professional e.g. planner, consultant	1	5	8	8	17
Unitary Council	0	2	3	0	2
Voluntary/charitable sector	0	2	0	1	3
Total	6	41	44	36	127

Table 4: Total number of respondents indicating a response to question 3

	Yes/Yes (subject to comment)	No	Not Sure	Total
Total number of respondents indicating a response	47	36	44	127
Overall percentage	37%	28%	35%	100%

Summary of responses

9. Overall, there was a mix of responses to the question and no clear majority either in favour or against the statement that there are schemes where the capping or removing the payment of hope value could increase the viability of certain schemes and/or increase the public benefits delivered through the schemes.

10. Those who indicated a positive response to question 3 provided the following comments:

Capping or removing hope value could have a role in progressing stalled regeneration schemes involving multiple landowners who are holding land to increase profits, for speculative gain or where they have an unrealistic view of market value.
There is potential for the capping of hope value where upfront infrastructure is required i.e. not essential for the delivery of the wider project but located on land owned by a third party and necessary for the satisfaction of planning conditions.
A study of Crossrail II indicated the removal of hope value would fund around 50% of the cost of the railway and 100% of the affordable housing commitment by acquiring land at close to industrial land values.
Mayoral teams at the West of England and Cambridgeshire and Peterborough Combined Authorities highlighted the cost of land as a major constraint and removing hope value from open market valuation would be a boost for local infrastructure and housing plans.
Analysis for the West Midlands Combined Authority indicated disregarding hope value from open market valuation would provide the authority with an additional £7bn of funding for infrastructure and affordable housing over a 20-year period. Transport for the North indicated an additional £1 billion over 20 years could be captured.
By enshrining in law the right to ‘prospective planning permission’, landowners expect to be paid a value for land which reflects what they might be paid with the greatest market value. An example is where a public sector body sought to purchase a site near Manchester for the delivery of affordable housing but a private sector developer was able to secure the site for a higher price to deliver a market-led scheme. This limited the provision of affordable housing in the local community delivered through the market led scheme.
A public sector body provided an example of where it acquired a former gasworks site in London to deliver a scheme with 35% affordable housing. Removing or reducing the payment of compensation for the prospect of planning permission would have allowed the capturing of more land value for public benefit through the delivery of more affordable housing above the 35% minimum.

11. Those who indicated a negative response to question 3 made the following observations:

Land value is a small proportion of an overall scheme cost. Capping or removing hope value is unlikely to make a difference in terms of viability.
The change will create uncertainty, lead to an increase in disputes, litigation and more objections to CPOs leading to increases in costs and time taken to settle claims. This will decrease the viability of schemes and slow the CPO process. The impact of the reforms to the Electronic Communications Code is an example of the consequences of interference with free market forces which has led to litigation, a reduction in consensual settlements and delays to scheme delivery and excessive cost.
Issues around land value are controlled by the planning system and not CPO compensation. The planning system should be used to address perceived issues of the value of land with planning permission.
Capping or removing hope value would conflict with the overriding ‘equivalence’ principle. It raises issues of property rights, fairness and risks creating a two-tier land valuation system i.e. owners under compulsory purchase already have no choice about losing their land but to have it taken without being paid a price for its potential future use would be unfair especially if neighbouring landowners can claim hope value through open market valuation.
The open market value with existing use is sometimes higher than the latent land value for a proposed scheme. Removing or capping hope value will not overcome this issue.
The reform could disincentivise investors in an area and undermine efforts to bring land forward for development.
Viability and deliverability are key elements in the justification of a CPO, acquiring authorities may be reluctant to disclose information indicating the poor viability of a marginal scheme.
The proposal will remove the ability for early stage negotiated settlements.
Removal of hope value puts greenfield/Green Belt sites at risk.
Few schemes are impacted by hope value. Two examples of schemes were provided of where claims for hope value relating to the development potential of land were paid but which had no impact on the viability of the schemes. One scheme involved the development of a former golf course, the other involved transport infrastructure.

12. Comments raised by respondents to question 3 who did not indicate a ‘Yes’ or ‘No’ response made the following points:

To maximise public benefits arising from development achieved via compulsory purchase, and to give those displaced surety in the process and consistent compensation, compensation payments should be calculated on the basis of existing use value.
Land should be capped at a reasonable margin above the ‘no-scheme’ value to reflect the land is being acquired compulsory.
In the early new towns, public bodies could buy land compulsorily at existing use value. Often the use of CPOs was not necessary as the ability to compulsorily acquire land at existing use value focused landowners and expedited the sale of land by agreement.
The payment of hope value introduces a degree of uncertainty and a significant aspect of delay in negotiations of CPO compensation.
Removing hope value would:
- incentivise landowners to bring forward policy compliant schemes in a reasonable timescale that make an allowance for landowner profit (thereby avoiding the risk of a council making a CPO);
- greatly improve Councils’ ability to make CPOs to acquire land at a realistic cost which would more readily allow for policy compliant development, thereby boosting affordable (including social) housing supply alongside infrastructure required.
In London, where the difference between hope value and existing use value is significant, compensation based on hope value can inhibit acquiring authorities from delivering affordable housing.
If hope value is removed there must be restrictions to ensure its use is limited to schemes which deliver affordable, social housing.

Government response

13. The government acknowledges the majority of responses to question 3 were evenly split between those in favour and those against. Some of the examples provided of schemes where capping or removing hope value would have increased viability were not applicable to compulsory purchase scenarios.

14. The government notes suggestions put forward by respondents of the different types of schemes where the capping or removal of hope value may increase scheme viability. In particular, those schemes where acquiring authorities are delivering regeneration and the delivery of affordable or social housing provision.

15. The government notes the comments made by some respondents that the potential capping or removal of hope value via directions may help focus landowners and the expedited sale of land by agreement.

Conclusion

16. The government considers a type of scheme where viability could be increased and public benefits delivered through capping or removing hope value from compulsory purchase compensation is a scheme involving provision of affordable (including social) housing.

17. The government notes the responses which highlighted a consequence of capping or removing hope value in a CPO scheme could be that adjoining landowners whose land falls outside the CPO red line boundary would continue to benefit from receiving full, open market value for their land where hope value is claimable. The government is of the view the use of directions should be on a scheme-by-scheme basis and could be limited to carefully defined circumstances. Furthermore, that acquiring authorities progressing schemes delivering clear public benefits are most likely to be able to provide evidence to demonstrate the capping or removing hope value compulsory purchase compensation would be justified in the public interest.

Question 4: Please provide any comments you may have as to the proportionality of capping or removing the payment of hope value balanced against the delivery of public benefits. Please provide any examples you have where you believe the public benefits would be such that it would be proportionate to impose such a cap or removal of hope value to a scheme and what those public benefits may be.

Summary of responses

18. Comments received by respondents to question 4 raised the following points:

Capping would provide fair parameters. For example, strategic land on the edge of a settlement with good prospects of being a new settlement typically trades at multiples of two to three times its existing use value (agricultural value).
Uplifts in land value generated though compulsory purchase should be recycled into the locality through a clearly evidenced and costed infrastructure delivery plan.
There should be a minimum threshold for landowners to receive a degree of hope value. Similar to a developer having to satisfy ground F under the Landlord and Tenant 1954 Act.
There is a case for capping hope value where upfront infrastructure is required and not deliverable by the private sector.
Capping or removing hope value would be proportional where it unlocks regeneration, for example, in a high street where an owner blocks the regeneration of a street.
Where only a ransom strip needs to be compulsory acquired it should be at its existing use value or existing use value plus a premium.
Existing use value plus percentage valuation of land would enhance viability within projects, increase the likelihood of them coming to fruition and provide public benefit through the delivery of the project. The benefit of this approach would help limit the amount paid for land while still enabling acquisition of the site.
Any capping formula could consider:
- The public interest of the proposed development with a definition which identifies the public benefit being delivered e.g. reducing local waiting lists and the need for social rented housing in the area / surrounding area.
- The existing use of the land – the formula could be tied to a rate closer to existing use than potential use i.e. example of viability of new towns development corporations.
- The actual eventual use of the land rather than its potential use in the future i.e. if the land bought using a CPO is intended for sub-market rental developments e.g. social rent then the council should pay the value of that use.

19. Responses received to question 4 which provided examples of public benefit which would be proportionate to impose a cap or removal of hope value included the following:

Delivery of affordable housing provision (one respondent’s modelling found that more than twice the level of affordable housing could be delivered if land acquisition was based on existing use value).
Regeneration of urban areas including vacant and under used sites.
Delivery of community development and social infrastructure such as education provision and health facilities.
Support to achieve wider social and cultural opportunities.

20. Those who responded to question 4 and disagreed with the proposal to cap or remove hope value made the following comments:

There is no proportionate correlation between capping or removing hope value and delivery of public benefits.
Any financial benefits realised from the proposal are likely to be limited. It is not considered they could be ringfenced to deliver ‘additional’ benefits given the fluid position of the costs of schemes over their lifetime.
A ‘fair’ land value capture policy must be applied across the entire land market. It would be more appropriate to apply a market wide land value capture tax which applies to all transactions not just to those which happen compulsorily.

Government response

21. The government acknowledges there were a range of responses received to this question and examples provided by respondents of the different types of public benefits where it may be proportionate to impose a cap or removal of hope value in a scheme subject to a CPO.

22. The government recognises the following examples of development, which deliver specific public benefits, were consistently raised by respondents (both in response to this and other questions):

affordable and socially rented housing to reduce local waiting lists;
community development such as education provision; and
support services such as health and medical facilities.

Conclusion

23. The government supports the argument that delivery of some public benefits could justify the removal of hope value on a scheme-by-scheme basis, providing the necessary evidence has been supplied to demonstrate the payment of compensation below market value can be justified in the public interest.

24. The government agrees with respondents’ comments that a standard capping policy should be implemented and it is of the view such an approach will ensure different land markets are reflected along with consistency being delivered to landowners who are the subject of directions. The government also agrees with respondents’ comments to question 8 that if hope value is capped at any percentage above existing use value, the process of agreeing hope value would still need to occur which could add delay to the payment of compensation resulting in increased costs and uncertainty of acquiring land via a CPO.

25. Having concluded a consistent capping policy should be implemented, and that the assessment of hope value would still need to occur under a standard capping formula which could lead to uncertainty, the government in proceeding with its direction proposal will do so on the basis that the effect of directions will be to remove hope value from compulsory purchase compensation.

Question 5: Do you have evidence of the extent to which hope value is currently claimed/paid generally in compulsory purchase situations? Please provide details and where possible any evidence that you have as to whether hope value is more likely to be paid on particular types of schemes, for example from urban regeneration schemes to greenfield schemes or from housing schemes to transport schemes.

Table 5: Statistical summary of responses to question 5

Organisation	Yes (subject to comment)	Yes	Not Sure	No	Total
Community Organisation	0	0	0	1	1
County Council	0	2	1	0	3
Developer	0	2	3	6	11
District/borough Council	0	0	2	3	5
Individual	0	2	24	10	36
Landowner	0	4	0	4	8
Other	1	1	5	2	9
Other Public Sector	1	1	5	4	11
Professional Association/ Industry representative body	2	5	6	8	21
Professional Institute/Professional e.g. planner, consultant	1	6	4	6	17
Unitary Council	0	1	1	0	2
Voluntary/charitable sector	1	0	1	1	3
Total	6	24	52	45	127

Table 6: Total number of respondents indicating a response to question 5

	Yes/Yes (subject to comment)	No	Not Sure	Total
Total number of respondents indicating a response	30	45	52	127
Overall percentage	24%	35%	41%	100%

Summary of responses

26. Over a third of respondents who submitted a ‘Yes/No’ answer to the question strongly disagreed that they could provide evidence of the extent to which hope value is currently claimed/paid generally in compulsory purchase situations. The majority of responses were unsure.

27. Respondents to question 5 who indicated they could not provide evidence of the extent to which hope value is currently claimed/paid generally in compulsory purchase situations made the following statements:

There are few cases where landowners have received sums greater than would have been achieved in the ‘no scheme world’ on the open market.
Publicly disclosable evidence on the extent to which hope value is claimed or paid in compulsory purchase situations is not held. Most negotiations with landowners result in a private treaty agreement.
It is not necessary to provide evidence since the point applies to all schemes i.e. full market value must be paid. There is always hope of a future use of land but the question is whether it has any value. The only instances where hope value is not relevant is where there is no planning scope for the land in the future for any more valuable purpose than it already has.
The current rules prevent potential transactions from being considered meaning case study examples are limited.
The assessment of hope value is a well-established alternative to the issuing of a CAAD. We are unaware of instances where hope value inclusion has unjustifiably increased compensation.

28. Respondents who submitted evidence in response to question 5 provided the following comments:

For transport schemes, hope value is claimable when greenfield land is developed as an indirect result of the scheme.
Claims for hope value in relation to brownfield land arise where there is a prospect of planning permission in the ‘no scheme’ world or the land benefits from a specific or broad policy support for redevelopment within an adopted local plan.
In the case of greenfield sites being promoted as new garden villages, land is only removed out of the Green Belt to deliver the specific garden village scheme. This makes it difficult for landowners to claim hope value for an alternative planning consent as in the ‘no scheme’ world the land would have remained in the Green Belt. Hope value is more likely in respect of greenfield sites where there is support for development in the local plan.
Where a major new town, garden village or urban extension is proposed, policies should be included in the local plan to prevent piecemeal development. This in turn limits claims for hope value.
For National Grid’s infrastructure schemes involving the acquisition of rights for linear assets, hope value is helpful to agreeing fair compensation.
Hope value is reflected in the market value of a site. For example, agricultural/amenity land on an urban fringe can attract a premium (2 or 3 times agricultural value) because of a potential planning permission in the future. This value increases as the planning process crystallizes through site allocations, masterplans, and then grating of consent. It is all hope value, just an increasing proportion of market value until its full development value is achieved through the granting of planning permission.
The principles of Stokes vs Cambridge are often applied and compulsory purchase is not used to address ransom positions. Ransom positions should be subject to compensation on the same basis as any other interest.
The following examples were submitted as cases where hope value (under section 14 of the Land Compensation Act 1961) has been paid:
- Potter v London Borough Hillingdon ([2010] UKUT 212) where compensation was determined on the basis the market value at the valuation date would reflect the possibility the land may have been incorporated into a future expansion of Heathrow Airport in the absence of the CPO.
- Transport for London (London Underground Limited) v Spirerose Limited (in administration).
- The Rooff Group case (which arose from the 2012 Olympics CPO) involved a successful appealed CAAD decision on land where there was no outstanding planning permission or plan allocation for development.
- The Upper Tribunal decision in Halpern & Others v GLA [2014] dealt with the assessment of development value pursuant to the grant of a CAAD.
- Garner & Anr v Metropolitan Borough Council of Stockport (2021) concerned pastureland in the Green Belt which was compulsorily acquired for an airport relief road and generated hope value.
- Golf Café Bars Ltd v West Yorkshire Combined Authority & Network Rail Infrastructure Ltd involved a CAAD for change of use of a service yard to car parking which enabled compensation based on hope value to be paid.
- The GLA used a CPO to deliver a brownfield regeneration scheme where the compensation paid was based on a hope value which had a role in delaying the overall compulsory acquisition process.

29. Other responses were received to question 5 which were not relevant to the question asked.

Government response

30. The government recognises responses to this question were mixed and limited evidence provided on the extent to which hope value is currently claimed or paid generally in compulsory purchase situations. Furthermore, that some evidence was based on assumptions and not practical examples.

31. The government notes the following types of schemes where hope value is more likely to be paid were consistently raised in responses to the question:

Transport schemes.
Schemes involving the regeneration of brownfield land as there is a greater prospect of planning permission in the ‘no scheme’ world being granted compared to greenfield sites. Schemes involving use of agricultural/amenity land on an urban fringe/edge of settlement.

Conclusion

32. Whilst responses to this question provided a limited evidence base on the extent to which hope value is paid in compulsory purchase situations, they did provide examples of the types of schemes in which it is more often paid. The government believes there is merit in proceeding with a carefully defined direction model approach which responds directly to issues raised by respondents to the consultation.

Question 6: Do you think the public benefits of capping or removing hope value is more likely to arise in particular types of scheme? Do you think any solution to this issue should be limited to particular types of scheme or apply across all types of compulsory purchase situations? Please provide details in support of your answers.

Table 7: Statistical summary of responses to question 6

Organisation	Yes (subject to comment)	Yes	Not Sure	No	Total
Community Organisation	0	1	0	0	1
County Council	0	2	1	0	3
Developer	1	4	2	4	11
District/borough Council	0	2	1	2	5
Individual	0	3	27	6	36
Landowner	0	0	4	4	8
Other	0	2	4	3	9
Other Public Sector	0	3	7	1	11
Professional Association/ Industry representative body	1	2	13	5	21
Professional Institute/Professional e.g. planner, consultant	2	3	4	8	17
Unitary Council	0	1	1	0	2
Voluntary/charitable sector	1	1	0	1	3
Total	5	24	64	34	127

Table 8: Total number of respondents indicating a response to question 6

	Yes/Yes (subject to comment)	No	Not Sure	Total
Total number of respondents indicating a response	29	34	64	127
Overall percentage	23%	27%	50%	100%

Summary of responses

33. Half of the responses to the question were unsure if there were more likely to be measurable public benefits in capping or removing hope value in particular types of scheme. Whilst the majority of respondents who submitted a ‘Yes/No’ answer provided a negative response.

34. Respondents to question 6 who did not support the proposal to cap or remove hope value in particular types of scheme or across all types of compulsory purchase situations made the following comments:

The loss of hope value puts greenfield sites at risk.
It would not be helpful to have different rules for different CPOs as it will add further complexity.
Hope value exists in absence of the CPO scheme as any location will have several potential uses (hope value) which the current owner choses not to, or does not wish to, access.
The ability to provide measurable public benefits is likely to derive from the values generated by the nature and scale of the scheme rather than from any capping of hope value for the land.
It is difficult to justify the removal or capping of hope value for developer-led schemes which will be expected to return a profit.
The public interest would be undermined by the introduction of the capping or removal of hope value as they amount to an interference with the European Convention on Human Rights.
Public benefits vary depending on the scheme and are hard to assess, monetise or value.
Claiming a portion of development value gain (‘hope value’) should be done through the planning system.

35. Respondents to question 6 who expressed a view on whether the capping or removal of hope value should be limited to particular types of scheme or apply across all types of compulsory purchase situations provided the following observations:

Loss of hope value on brownfield sites could be appropriate where: land has been confiscated due to proceeds of crime, individuals being sanctioned, or due to being left derelict.
Where land value is low but hope value is high e.g. from basic grade agricultural land to housing development land there would be benefit to removing/capping hope value for public benefit.
Major land allocations as they will generate a significant baseline premium.
Regeneration activities which are already unviable and where there is market failure.
Where there are viability constraints e.g. land for affordable housing, and/or high upfront infrastructure requirements.
Ransom scenarios where the land in question is required to deliver access/infrastructure improvements with measurable public benefits.
Garden communities where the delivery of high-quality design and timely infrastructure provision makes the level of growth acceptable.
A consistent existing use value plus should be used across all projects.
Schemes of national importance involving emergency pandemic hospitals, emergency flood relief schemes, and war-time military installations.
Major linear infrastructure schemes should be excluded.
Integrated housing and transport developments are more likely to be given a greater public interest weighting.
Proposals for strategic residential led growth which can be frustrated by landowners with unrealistic land value expectations.
The designation of an area for a Development Corporation/Mayoral Development Corporation.
Where schemes are public sector-led with no requirements for developer profit. These are likely to be projects such as estate regeneration where hope value is either minimal or nil.

36. Other responses were received to question 6 which were not relevant to the question asked.

Government response

37. The government acknowledges the majority of respondents to this question were unsure on whether the public benefits of capping or removing hope value should be limited to particular types of scheme or apply across all types of compulsory purchase situations.

38. The government identified a recurring theme raised by respondents which was hope value could be capped or removed in schemes where it may improve scheme viability and increase the level of affordable housing secured. Furthermore, that the public benefits of capping or removing hope value would be more likely to arise in schemes where there is no private sector promotor, who would expect to return a profit, and where public sector investment is needed to bring forward development. Other common themes raised were the public benefits of capping or removing hope value is more likely to arise in schemes progressed by Development Corporations.

39. The government recognises the comments made by respondents on the interaction of the proposals with compatibility with the European Convention on Human Rights.

Conclusion

40. As a result of these responses, the government considers the removal of hope value through a direction could be limited to the following types of schemes as public benefits may be identified through such an approach:

Affordable (including social) housing development.
Development Corporations led development (including New Towns).
Public sector led development with no private sector delivery partner.

41. The government when proceeding with its proposal on the use of directions will ensure the primary legislation implementing the proposal enables acquiring and confirming authorities to undertake full proportionality assessments so they can be satisfied that a fair balance has been struck in each case between the rights of affected individuals and the general interests of the community before directions are confirmed.

Question 4

Consultation proposal

Accepted Answer

42. The consultation sought views on a specific proposal to allow acquiring authorities to request a direction from the Secretary of State that, for a specific scheme, payments in respect of hope value may be capped at existing use value or an amount above existing use value where it can be shown that the public interest in doing so would be justified.

Question 7: Do you agree with the proposal to address this through the issue of directions for specific schemes as set out in this consultation?

Table 9: Statistical summary of responses to question 7

Organisation	Yes (subject to comment)	Yes	Not Sure	No	Total
Community Organisation	0	0	0	1	1
County Council	0	2	1	0	3
Developer	1	2	2	6	11
District/borough Council	1	1	2	1	5
Individual	0	2	3	31	36
Landowner	0	0	5	3	8
Other	0	2	4	3	9
Other Public Sector	1	8	1	1	11
Professional Association/ Industry representative body	2	6	5	8	21
Professional Institute/Professional e.g. planner, consultant	1	3	2	11	17
Unitary Council	0	2	0	0	2
Voluntary/charitable sector	1	0	1	1	3
Total	7	28	26	66	127

Table 10: Total number of respondents indicating a response to question 7

	Yes/Yes (subject to comment)	No	Not Sure	Total
Total number of respondents indicating a response	35	66	26	127
Overall percentage	28%	52%	20%	100%

Summary of responses

43. The majority of responses to the question (over half) made significant objections and opposed the proposal to allow acquiring authorities to request a direction from the Secretary of State that, for a specific scheme, payments in respect of hope value may be capped at existing use value or an amount above existing use value where it can be shown that the public interest in doing so would be justified.

44. Respondents to question 7 who strongly disagreed with the proposal commented:

Any changes must honour the principle of equivalence and be compatible with human rights legislation. These proposals would create a two-tier system for land valuations, leading to unfairness and legal challenges to any directions made.
An application for a direction would add complexity, time and cost to CPOs.
A tax on land value gain due to change of use (for example, greenfield to housing) is a better way of harvesting the public benefit. A tax of actual values is a cleaner system than guessing future values.
There would be a dependency on demonstrating a scheme is unviable without a direction. This raises the following issues:
- If a direction is refused the scheme underpinning the CPO will be shown to be unviable and therefore undeliverable. Acquiring authorities are unlikely to pursue a direction if a risk is present.
- It would be difficult to justify a direction which would deprive landowners of market value if other stakeholders in the scheme were able to receive a full return e.g. contractors or developers delivering the scheme receiving a profit from their involvement.
- There is scope for legal challenge to prevent directions being made and there are questions on whether there is a risk of non-compliance with state aid rules.
It would be better to limit and cap hope value more generally in combination with a more certain affordable housing obligations regime.
It would be better to use the local plan process to set the extent of planning obligations and reduce land values across the board.
Hope value is a legitimate element of market value. If the view is held hope value shouldn’t form part of market value then the means to do that is a market wide policy. This could impact the use of compulsory purchase powers.

45. The respondents to question 7 who agreed with the proposal made the following comments:

There are concerns on the time required to achieve a direction as most projects requiring a CPO are time limited by funding.
Consideration should be given to having an independent body leading on the direction application, with local endorsement, to ensure applications are in accordance with the principles of compulsory purchase i.e. a tool of last resort.
Directions could create greater certainty for acquiring authorities and increase their confidence in pursuing CPOs, especially when costs are a material factor. There could be practical problems however:
- It will be necessary to disclose commercially sensitive information (such as property cost estimates) on land values and budget estimates for the scheme. This may make authorities reluctant to engage in the direction process.
- The disclosure of commercially sensitive information will make the proposed CPO vulnerable to objections on viability grounds and potential challenge. This may lead to delays and cost increases.
Removal of hope value would lead to:
- improved certainty and avoid confusion in establishing the appropriate level of compensation i.e. existing use value (plus standard heads of compensation) or market value for a policy compliant alternative use; and
- reduced CPO processing time as landowners would know they could not claim hope value so would have an incentive to negotiate a fair price.
The directions process should be available in the planning process to influence landowner and developer behaviour. It should also be a material planning consideration and included in National Planning Practice Guidance relating to the benchmarking of land values for planning viability purposes.
There must be safeguards to restrict the use of directions to exceptional circumstances with a very high public benefit test involving the redevelopment of derelict/suitable brownfield land for social housing.
The directions process would need to be independently assessed by an expert.
It may be appropriate for a ‘minded to’ decision to give a direction where it will be necessary to start to influence landowner and developer behaviour.
The GLA Group suggested a blanket direction, capping hope value for all compulsory acquisition schemes in London. Alternatively, the issuing of directions should be devolved to the Mayor of London.
Respondents suggested that guidance should be provided on how directions may be applied for, the requirements for demonstrating a scheme is in the public interest and the thresholds for determining whether payment of compensation is capped at existing use value or at a percentage above.

46. Other responses were received to question 7 which were not relevant to the question asked.

Government response

47. The government notes half of respondents opposed the consultation proposal and that a range of views were expressed on the different merits of either capping or removing hope value in its entirety. A common theme raised by those in support of the proposal was that local authorities should be allowed to request directions to acquire sites at or close to existing use value as it would add surety to all projects and improve their viability. Also, authorities should have the flexibility to make compensation offers over existing use value even when a direction is applied for.

48. The government acknowledges a consistent theme raised in responses was that the use of directions should be limited, straightforward to obtain and there is a need for guidance on what is meant by ‘public interest’ and the practical operation of the direction process. Furthermore, any legislation must be clear as to the type of schemes which a direction could be applied for, be compatible with the European Convention on Human Rights and provide landowners with a right to legal challenge and recovery of costs when objecting to a direction.

Conclusion

49. The government is committed to addressing issues around heightened expectations of hope value in the assessment of compulsory purchase compensation which can lead to claims for higher than necessary land settlements, making it more expensive for public authorities to deliver schemes in the public interest through compulsory purchase.

50. The government does not consider it proportionate to remove or cap hope value compensation in all compulsory purchase instances. It believes the implementation of a direction approach on a scheme-by-scheme has the advantage of allowing for individual cases to be justified on their own merits and an independent assessment to be undertaken of compatibility with the European Convention on Human Rights. The government considers the use of directions to restrict the payment of hope value in the following types of development is most likely to be justifiable in the public interest as direct benefits to local communities can be clearly identified and delivered:

affordable and/or social housing;
education provision; and
health and medical facilities.

Furthermore, limiting the use of directions to these types of development will help provide certainty to landowners.

51. The government considers use of directions on a scheme-by-scheme basis will provide upfront certainty for acquiring authorities as to the levels of compensation which would be payable for the relevant scheme under compulsory purchase. Also, that authorities would have more confidence in their property cost estimates and more certainty about the viability of the scheme including its ability to deliver benefits in the public interest.

It would also help focus disputes over the amount of compensation payable and reduce uncertainty for acquiring authorities years into the development of a scheme, particularly where the viability of the scheme or delivery of the benefits of the scheme depend on the value paid for the underlying land.

52. The government notes comments made in support of the use of directions that acquiring authorities should be allowed the flexibility to pay over and above existing use value to expedite the land assembly process and save uncertainty around costs. The Government considers use of directions on a scheme-by-scheme basis will be an optional mechanism which acquiring authorities may choose to use at their discretion, where appropriate. As such, acquiring authorities could choose not to apply for a direction and instead proceed with acquiring land via voluntary agreement secured by negotiation or compulsory purchase on the basis of paying compensation reflecting the prospect of planning permission i.e. hope value or development value for establishing appropriate alternative development.

53. The government when proceeding with its proposal on the use of directions on a scheme-by-scheme basis to remove or cap hope value will ensure:

the principals of the European Convention on Human Rights are considered to ensure compatibility;
the direction process will allow for the recovery of reasonable costs by landowners and for challenges to be made to the making of directions;
the direction process is combined with the making of a CPO (including its submission to the Secretary of State for confirmation) to: (a) avoid adding complexity and uncertainty to the CPO process, and (b) address concerns that it would be difficult to ascertain the level of hope value which would apply at the point of the issuing of a direction before a CPO is submitted for confirmation i.e. when it is made; and
it publishes guidance on:

i) how directions may be applied for;

ii) what an acquiring authority ought to be able to demonstrate to justify a direction, such as: (a) how a scheme will deliver public benefits, and (b) how the payment of compensation below market value will be justified in the public interest; and

iii) clarifying the distinction between net profit from the sale of land and Gross Development Value including the figure which must be included in evidence supporting a direction and the removal of hope value.

Question 8: Do you agree with the proposal that the directions could cap the payment of compensation at existing use value or at a percentage above existing use value (excluding the payment of compensation under other heads of claim)?

Table 11: Statistical summary of responses to question 8

Organisation	Yes (subject to comment)	Yes	Not Sure	No	Total
Community Organisation	0	0	0	1	1
County Council	0	2	1	0	3
Developer	1	2	2	6	11
District/borough Council	1	3	1	0	5
Individual	0	3	23	10	36
Landowner	0	1	1	6	8
Other	1	1	3	4	9
Other Public Sector	2	5	4	0	11
Professional Association/ Industry representative body	0	6	5	10	21
Professional Institute/Professional e.g. planner, consultant	2	0	4	11	17
Unitary Council	1	1	0	0	2
Voluntary/charitable sector	1	0	1	1	3
Total	9	24	45	49	127

Table 12: Total number of respondents indicating a response to question 8

	Yes/Yes (subject to comment)	No	Not Sure	Total
Total number of respondents indicating a response	33	49	45	127
Overall percentage	26%	39%	35%	100%

Summary of responses

54. Overall, the majority of respondents to the question who submitted a ‘Yes/No’ answer opposed the proposal that directions could cap the payment of compensation at existing use value or at a percentage above existing use value (excluding the payment of compensation under other heads of claim).

55. Respondents to question 8 who disagreed provided the following comments:

Landowners would make objections to the CPO, refuse to sell by agreement and likely make a referral to the Upper Tribunal.
Doubts were expressed that a formula could be used to deliver fairness and reasonableness.
If hope value were to be capped at any percentage, the process of agreeing hope value would still need to occur. This proposal would not speed up the payment of compensation nor reduce the cost of agreeing compensation.

56. Those who responded to question 8 and agreed made the following observations:

Capping compensation at existing use value or at a percentage above is reasonable, proportionate and would provide clarity and certainty. This will ensure more land value uplift is invested into new developments and the delivery of public benefits.
Any cap should be based on the higher of: (a) the usual “market + 10%” formula of increased development value; or (b) whatever is needed to achieve reasonable equivalence.
Capping hope value at no less than existing use value ensures landowners are fairly recompensed whilst the community benefits from the CPO scheme.
The proposals refer to the viability guidance which includes the concept of alternative use value (AUV) as well as existing use value (EUV) and EUV plus. Viability guidance is an inappropriate example to provide in the context of CPOs as viability does not engage human rights issues. As a minimum, the cap should be set at the higher of AUV, EUV, and EUV plus.
Existing use value plus would encourage landowners to come forward and negotiate over voluntary acquisition thereby reducing the scope for disputes.
The closer the value gets to existing use value then the higher the impact. An option would be to cap returns for land at a clearer and consistent per acre value, potentially with some form of regional/area or land use quality indexation.

57. Other responses were received to question 8 which were not relevant to the question asked.

Government response

58. The government notes a small majority of responses to the question disagreed with the principal of capping the payment of compensation at existing use value or at a percentage above existing use value (excluding the payment of compensation under other heads of claim).

59. Whilst the government acknowledges the comments which disagree with the proposal, it noted other responses which indicated that if hope value is capped at a percentage it would be difficult to set a cap at the right percentage above existing use value to achieve clarity, consistency and certainty for all parties on a scheme-by-scheme basis.

Conclusion

60. The government agrees with respondents’ comments that if hope value is capped at any percentage above existing use value, the process of agreeing hope value would still need to occur which could add delay to the payment of compensation resulting in increased costs and uncertainty of acquiring land via a CPO. The government also agrees with respondents’ comments to question 4 that a standard capping policy should be implemented and it is of the view such an approach will ensure different land markets are reflected along with consistency being delivered to landowners who are the subject of directions.

61. Having concluded a consistent capping policy should be implemented, and that the assessment of hope value would still need to occur under the use of a capping formula which could lead to uncertainty, the government in proceeding with its direction proposal will do so on the basis that the effect of directions will be to remove hope value from compulsory purchase compensation.

Question 9: Please provide any comments you may have as to: (1) whether it will be possible to identify certain, deliverable public benefits in applying for directions; (2) how it will be possible to link those public benefits to value captured.

62. Question 9 did not require respondents to provide either a ‘yes’ or ‘no’ response. As such, it was not possible to generate a statistical summary of responses to this question.

Summary of responses

63. Respondents to question 9 who expressed a positive response provided the following comments:

Acquiring authorities could be required to prepare a benefit realisation plan to outline the measures which will secure public benefits. For example, “the money saved from reduced compensation will fund an additional 20% affordable housing provision over the local plan requirement of 40%”.
Public benefits could include strategic infrastructure such as new roads/bridges, social infrastructure including education and health provision and regeneration improvements. The process of linking the benefits to the value captured could be based on a negotiated section 106 agreement which had not been signed but would set out the public benefits of the wider scheme.
For some schemes there may be tangible links to enhanced provision such as a cycle route, the provision of play facilities or delivering a higher proportion of affordable housing. Ensuring a sustainable mix of homes, infrastructure requirements, community uses such as health facilities would deliver clear public benefits.
Reducing the cost of assembling land via a CPO and regenerating vacant and under used sites will make affordable housing schemes more viable and increase the public benefits delivered.

64. Respondents to question 9 who gave negative responses made the following statements:

Respondents stated that under existing laws, public benefits are being delivered providing compensation is paid on the principle of equivalence. Furthermore, that public benefits are subjective in nature and will vary and there is no equitable way for public benefits to be directly linked to land value capture and any method for doing so will be subject to challenge on what can be defined as “public benefit”.
If public benefits are needed as part of a scheme, these should be part of the design and objectives of the scheme from the outset, be proven to be needed in the public interest, and covered in the cost of the scheme.
It was argued that on a major project the property acquisition price may only account for 5-10% of the total project cost. Being able to evidence the public benefits of the project as being solely the result of the hope value captured via the direction would be challenging.
Viability review mechanisms afford the public sector the ability to recover public benefits if the viability of development improves as it progresses. It is inappropriate a landowner should be deprived of hope value from the outset if the subsequent development proves not to be as unviable as originally assessed.

65. Other responses were received to question 9 which were not relevant to the question asked.

Government response

66. The government acknowledges the approach suggested by respondents which could be adopted to identify certain, deliverable public benefits in applying for directions which is based on the difference between landowners’ expectation (including hope value) and existing use value. This approach would allow the difference in value to be calculated by an acquiring authority which could be included in its viability modelling and used to identify the additional public benefits which could be achieved through value captured.

67. The government notes common examples provided by respondents of public benefits which could be linked to land value captured via the issuing of directions included: achieving higher levels of affordable housing, or community infrastructure such as education or health provision. It also notes concerns raised by several respondents relating to the definition of what a ‘public benefit’ is and how it can be linked effectively to land value capture.

Conclusion

68. The government considers the direction process will only function satisfactorily if an acquiring authority, on seeking a direction, identifies the relevant public benefits to be delivered and produces robust evidence to demonstrate how the value captured by removing the payment of hope value from compensation would deliver those benefits.

69. The government however recognises the concerns raised by respondents on the subjective nature of public benefits, and in proceeding with its direction proposal it will restrict the use of the directions to:

(a) a high public benefit test, and

(b) types of uses which deliver clear benefits in the public interest.

70. Whilst the government does not consider it would be proportionate to remove hope value compensation in all compulsory purchase instances, based on the responses submitted to the consultation, it believes there may be certain types of development where the removal of hope value from compensation will enable it to be brought forward to deliver public benefits which otherwise may not be possible. As such, the government intends to identify in primary legislation particular types of development it thinks may be applicable for directions to be sought on.

71. A consistent theme running through responses to the majority of the consultation questions was the identification of affordable and social housing as a type of development where the issuing of directions to limit hope value compensation would be appropriate and justifiable.

72. The government recognises other consistent examples identified in responses to the consultation of public authority-led schemes where public benefits could be delivered in the public interest both for, and beyond, the immediate local community through the acquisition of land at closer to existing use value were:

education development, and
health facilities.

73. Reflecting responses received to the consultation, in proceeding with its direction proposal, the government’s approach to the use of directions is to restrict the payment of hope value compensation for land to existing use value via the issuing of directions on a scheme-by-scheme basis where CPOs are being used to facilitate provision of:

affordable or social housing,
education development, or
health facilities,

and the public interest for the making of the direction can be justified. Furthermore, that these types of development are areas which the government considers reflect societal priorities and should be addressed by public policy.

74. To address respondents’ concerns on the justification of paying less than market value for land, in proceeding with its proposal the government will make it a statutory requirement in the direction process that the Secretary of State, when considering a direction, must be satisfied that it is justified in the public interest before they can confirm a CPO with a direction.

75. For each direction sought, the government will require acquiring authorities to provide evidence of landowners’ expectation on land values (including hope value) and the existing use value of the land. This approach will enable an assessment of proportionality to be undertaken by the Secretary of State on a case-by-case basis. For example, the government recognises it may be possible to identify deliverable public benefits in the form of a quantum of affordable housing which would be delivered through the acquisition of land at existing use value.

76. The government considers the issuing of directions limited to the three types of development identified above in paragraph 73 will help improve the viability and delivery of these types of schemes which may otherwise not come forward to deliver clear public benefits.

Question 10: Do you think that an acquiring authority should have to consult with affected landowners before seeking a direction from the Secretary of State?

Table 13: Statistical summary of responses to question 10

Organisation	Yes (subject to comment)	Yes	Not Sure	No	Total
Community Organisation	0	1	0	0	1
County Council	0	3	0	0	3
Developer	0	8	3	0	11
District/borough Council	1	2	2	0	5
Individual	0	12	24	0	36
Landowner	0	8	0	0	8
Other	1	2	5	1	9
Other Public Sector	2	3	5	1	11
Professional Association/ Industry representative body	0	14	5	2	21
Professional Institute/Professional e.g. planner, consultant	1	10	3	3	17
Unitary Council	0	1	0	1	2
Voluntary/charitable sector	1	1	1	0	32
Total	6	65	48	8	127

Table 14: Total number of respondents indicating a response to question 10

	Yes/Yes (subject to comment)	No	Not Sure	Total
Total number of respondents indicating a response	71	8	48	127
Overall percentage	56%	6%	38%	100%

Summary of responses

77. The majority of responses to the question agreed acquiring authorities should have to consult landowners before they seek a direction from the Secretary of State.

78. Respondents who responded positively to question 10 made the following comments:

To ensure accountability and transparency, landowner consultation should take place. It is a fundamental requirement of Human Rights legislation.
Landowners should be able to make representations to the Secretary of State and in person where necessary. There should also be an appeal process to be determined by an independent expert.
Acquiring authorities should engage in a pre-direction conversation with the Secretary of State to allow a provisional value to be agreed, giving confidence to landowners as well as giving surety in viability of the project.
Landowners should be offered a defined and reasonable timeframe within which to engage and reach agreement with an acquiring authority before a direction is sought.
The reasonable costs of landowners seeking professional advice to respond to a consultation should be borne by acquiring authorities.
There should be a genuine attempt by acquiring authorities to engage in setting agreed benchmarks before a direction can be sought.
The most appropriate means of testing for public benefits would be via a local referendum.
Any consultation duty should be extended to parish councils and land occupiers in particular tenants.
Clear guidance is needed on the government’s expectations for consultation.

79. Respondents who responded negatively to question 10 provided the following views:

Acquiring authorities should not have to consult but, instead, serve notice to landowners. Information about who controls land can be difficult to find and a requirement to consult could be a barrier and create additional incentives for landowners to obscure their ownership.
If landowners have any right to object to a direction this will create further delays to the scheme.
There should be an obligation for acquiring authorities to use reasonable endeavours to notify landowners in advance of an application seeking a direction.
A prescribed notification process with timeframes rather than specific consultation should form part of the direction procedure.

80. Other responses were received to question 10 which were not relevant to the question asked.

Government response

81. The government recognises the majority of respondents to question 10 were in favour of requiring acquiring authorities to consult landowners before a direction is sought from the Secretary of State.

82. The government notes frequent themes raised in responses were the need to ensure landowners can make representations on directions within clearly defined timescales but that the representations procedure should not add complexity to the CPO process.

Conclusion

83. To mitigate against potential unfairness to landowners, the government considers it necessary to allow qualifying persons to submit objections to the making of a direction in the same way they can object to the making of a CPO. The government will facilitate this by combining the process of applying for a direction with the making of a CPO (including its submission to the Secretary of State for confirmation). This will enable qualifying persons to make objections to a direction during the statutory 21-day period for submitting objections to a CPO and also make further representations at an inquiry or hearing. It will also address concerns raised by respondents on allowing a lengthy consultation procedure and will ensure the government’s priority of reducing complexity in the CPO process is reflected.

84. By combining the processes for applying for a direction and the making of a CPO, acquiring authorities will be required to notify all qualifying persons (as defined in section 12 of the Acquisition of Land Act 1981) of the making of the CPO which includes a direction. The Government will modify the notification procedure under section 12 of the Acquisition of Land Act 1981 to require notice of a CPO to include a statement that the CPO includes a direction and the effect this will have i.e. preventing compensation being claimed for the value associated with:

(a)the prospect of planning permission being granted (hope value); and

(b)establishing appropriate alternative development via a Certificate of Appropriate Alternative Development.

85. As set out in the government response to question 7, to ensure safeguards are in place to protect landowners, the government considers it appropriate to allow landowners to be able to:

(a) claim reasonable costs associated with objecting to a direction; and

(b) challenge the making of a direction by applying to the High Court under section 23(2) of the Acquisition of Land Act 1981.

86. The government’s Guidance on Compulsory Purchase Process and The Crichel Down Rules will be updated to reflect the requirement for landowners to be notified of the making of a direction and for them to be able to make objections.

Question 11: Do you agree that issuing directions should only be to schemes where the acquiring authority is also a public sector entity (and subject to the public sector equality duty)?

Table 15: Statistical summary of responses to question 11

Organisation	Yes (subject to comment)	Yes	Not Sure	No	Total
Community Organisation	0	0	0	1	1
County Council	0	2	1	0	3
Developer	0	5	5	1	11
District/borough Council	0	3	2	0	5
Individual	0	7	24	5	36
Landowner	0	3	3	2	8
Other	0	2	5	2	9
Other Public Sector	2	2	4	3	11
Professional Association/ Industry representative body	0	11	9	1	21
Professional Institute/Professional e.g. planner, consultant	1	7	3	6	17
Unitary Council	0	0	2	0	2
Voluntary/charitable sector	1	1	1	0	3
Total	4	43	59	21	127

Table 16: Total number of respondents indicating a response to question 11

	Yes/Yes (subject to comment)	No	Not Sure	Total
Total number of respondents indicating a response	47	21	59	68
Overall percentage	37%	17%	46%	100%

Summary of responses

87. Almost half of those who responded to the question were unsure on whether the issuing of directions should only be on schemes where the acquiring authority is a public sector entity and subject to the public sector equality duty. Whilst a third of respondents who provided a ‘Yes / No’ answer agreed that directions should only be applicable to schemes where the acquiring authority is a public sector entity.

88. Respondents to question 11 who provided a positive response provided the following comments:

This is necessary to ensure those responsible for decisions to acquire land, and the public benefits arguments that support these decisions, are subject to public scrutiny and comply with the Equality Act.
The power to apply for a direction should only apply where the acquiring authority is a public sector entity and is promoting a CPO which delivers clear public benefits, such as the provision of key strategic infrastructure e.g. a hospital the delivery of which may not be viable.
Directions should not be used where a third-party commercial developer is contracted by the public sector entity to deliver the development who may be indemnifying the public sector body in relation to costs. This is more likely to be an issue where land is acquired by a local authority for land assembly purposes, for housing or employment land, and then developed out and sold by a commercial developer.

89. Respondents to question 11 who disagreed the issuing of directions should only be on schemes where the acquiring authority is also a public sector entity made the following statements:

Private developers and housing associations should be able to put forward CPOs which might require directions.
Where CPO powers are exercised by a public body in partnership, or through a development agreement, with a private sector entity, an application for a direction should ensure it has been demonstrated there is a need for such a capping order, without which identified public benefits could not be realised.
Directions should be extended to not-for-profit organisations such as registered providers of affordable housing, Community Land Trusts and charities.
Where a development partner is a registered social landlord, there are likely to be significant public benefits given the scheme is likely to consist of, or include, a high percentage of affordable housing. The ability to apply for direction should apply to all those authorities who are subject to the public sector equality duty.
It would be useful to have the option to seek directions as a safety net for special circumstances where there is a public interest which can be evidenced by private companies.
It could be linked to certain bodies which have a clear purpose and mandate to deliver public benefits. I.e. public entities such as Homes England, Development Corporations, Mayoral Development Corporations or any other bodies with similar purposes.

90. Other responses were received to question 11 which were not relevant to the question asked.

Government response

91. The government notes, of the responses submitted to question 10 which indicated a ‘yes/no’ answer, the majority were in favour of directions only being issued on schemes where the acquiring authority is a public sector entity.

Conclusion

92. The government’s objective is to enable more land value to be captured and then invested for the public benefit in schemes where there is a compelling case in the public interest to do so. For example, ensuring the viability of a scheme which may otherwise not come forward. In light of the comments received in favour of directions only being sought on schemes where the acquiring authority is a public sector entity, the government considers directions should only be made where they support schemes being taken forward by public sector acquiring authorities to deliver vital benefits in the public interest and which do not increase private sector profits. Furthermore, that these schemes are most likely to facilitate clear, significant benefits in the public interest because of action taken by a public body.

93. The government in proceeding with its direction proposal will ensure certain public sector acquiring authorities, such as local authorities, Development Corporations, Homes England, and Greater London Authority, are not prevented from seeking directions from the Secretary of State where they are assembling land in partnership with not-for-profit providers of affordable housing, Community Land Trusts and charities to facilitate provision of affordable housing via the use of CPO, provided there is sufficient public interest justification.

94. The government’s Guidance on Compulsory Purchase Process and The Crichel Down Rules will be updated make it clear what is meant by “public interest test” and that the government would not consider it proportionate for a direction to remove hope value compensation in order to assist the profits of a private developer partner.

Question 12: It might be possible for landowners to seek a planning permission so that development value applies under section 14(2)(a) LCA 1961 circumventing any cap applied under a direction. Do you think it should be possible for the directions to cap development value for any planning permission which falls under section 14(2)(a) where that planning permission is made after the “launch date” of the scheme or after the date the directions are issued if later? The launch date is defined by section 14(6) LCA 1961.

Table 17: Statistical summary of responses to question 12

Organisation	Yes (subject to comment)	Yes	Not Sure	No	Total
Community Organisation	0	0	0	1	1
County Council	0	0	3	0	3
Developer	1	2	3	5	11
District/borough Council	0	3	2		5
Individual	0	3	25	8	36
Landowner	0	1	1	6	8
Other	0	1	6	2	9
Other Public Sector	0	4	5	2	11
Professional Association/ Industry representative body	0	1	10	10	21
Professional Institute/Professional e.g. planner, consultant	0	0	5	12	17
Unitary Council	0	1	1	0	2
Voluntary/charitable sector	0	0	3	0	3
Total	1	16	64	46	127

Table 18: Total number of respondents indicating a response to question 12

	Yes/Yes (subject to comment)	No	Not Sure	Total
Total number of respondents indicating a response	17	46	64	127
Overall percentage	13%	36%	50%	100%

Summary of responses

95. Half of those who responded to question 12 were unsure on whether it should be possible for a direction to cap development value for any planning permission which falls under section 14(2)(a) of the Land Compensation Act 1961 where that planning permission is made after the “launch date” of the scheme or after the date the directions are issued if later. Whilst over a third of those respondents who provided a ‘Yes / No’ answer disagreed.

96. Respondents to question 12 who disagreed offered the following observations:

Landowners’ rights to seek a planning permission so development value applies is an important part of the CPO process. This ensures landowners are fairly and reasonably compensated.
Under the current compensation regime, account may be taken of a planning permission that is in force at the valuation date. Proposing to put a cap/limit on uplift resulting from a planning permission granted before the valuation date would unfairly prejudice the landowner as the value would not reflect open market value. The principle of equivalence would be offended.
An alternative is to extend the use of safeguarding directions to prevent the grant of planning permissions which would conflict with schemes that are of sufficient public benefit to warrant the making of a direction to remove hope value.
Applicants must be able to appeal a planning decision so they can receive hope value in full i.e. if a planning application was made before the ‘launch date’ and refused by the local planning authority but subsequently granted on appeal.
Landowners of safeguarded land, who consider their land has development value, will obtain a Certificate of Appropriate Alternative Development (CAAD) to prove their position. The number of CAAD applications will increase and have implications for a stretched planning system.
There remains a risk landowners might seek planning permission on a site where a CPO is intended prior to the valuation date but it is not clear if the planning authority must reject such applications.
Where planning permission is granted after the “launch date” of the scheme, or after the date a direction is issued if later, such a cap would differentiate between permissions granted before either of those dates and permissions granted after. The former would have the benefit of the full development value relating to the permitted development whereas the latter would not.

97. Respondents to question 12 who agreed made the following comments:

The value of a planning permission obtained post the “launch date” of a CPO scheme should not be capable of being taken into account in the valuation of land acquired. A benefit of removing or capping hope value is the certainty it creates in respect of compensation payable. This certainty would be reduced if, having made the CPO, a landowner submits a planning application in respect of their land. Such unforeseen costs may result in the development becoming unviable resulting in none of the public benefits associated with it being delivered.
The launch date is late in the process so it would be more appropriate for the cap to apply earlier to be more effective. For example, it could apply when any consultation on the scheme or planning permission for it is carried out by the acquiring authority. A concern is that authorities may use non-planning related reasons to refuse or delay a planning permission to pave the way for a CPO and to reduce compensation at a later date.
The aim should be to stop all speculative planning applications that seek to enhance the value of land.

98. Other responses were received to question 12 which were not relevant to the question asked.

Government response

99. The government agrees with respondents’ comments that limiting development value being claimed for a planning permission granted before the relevant valuation date would be unnecessarily unfair on landowners.

100. The government recognises that where land is included in a CPO which has been made, the prospect of a planning permission being granted on the land for a use which differs from the scheme underlying the CPO is likely to be negatively affected.

Conclusion

101. The government considers it unlikely in practice that planning permissions would be granted after the launch date of a CPO (i.e. after it has been made) for development which would be inconsistent with the CPO scheme and incapable of being implemented. If planning permission were to be granted for some form of development, it would be because the decision-making body was satisfied there were sound reasons to do so notwithstanding the scheme.

102. To avoid confusion and maintain consistency with how land values are assessed under rule (2) in section 5 of the Land Compensation Act 1961 i.e. the valuation must be made as at the relevant valuation date, the government in proceeding with its direction proposal will allow planning permissions which are in force on the relevant valuation date to be taken into account in the assessment of compensation where a CPO has been confirmed with a direction.

Question 13: Do you have any further comments as to how the process of seeking and issuing directions might work?

103. Question 13 did not require respondents to provide either a ‘yes’ or ‘no’ response. As such, it was not possible to generate a statistical summary of responses to this question.

Summary of responses

104. Responses received to question 13 were as follows:

Use of directions could be prioritised for:
- New Town and Urban Development Corporations
- Local planning authorities with a local plan in place
- Local planning authorities wishing to approve and vest land for urban extensions or villages
- The regeneration of derelict and vacant industrial land
Directions could relate to land zoned for housing, transport, or other regeneration purposes. The cap would relate to both development value and prospective development value (i.e. hope value).
The procedures and timescales should be clear to ensure any requests for a direction are dealt with efficiently and all parties can make representations.
The process for determining values should be carried out by an independent expert such as the Upper Tribunal and should be binding on the Secretary of State when making a direction.
A direction should be applied for when the acquiring authority applies for CPO powers and not before.
There are concerns about the role of the Secretary of State in the issuing of directions. Establishing an independent body to determine value and to scrutinise the public benefits claimed, and if necessary, to ring-fence those public benefits to ensure they are delivered would be helpful.
It was also argued that the direction process should automatically apply to allocated sites in a local plan for schemes which are in accordance with the local plan.
Value discussed is an important distinction which needs to be made between the net profit the landowner receives from a sale and the headline price i.e. Gross Development Value (GDV) reported as paid for the land. A development plot may, for example, have a headline GDV of £1m per acre but the landowner will see less than this. There are a number of costs which come out of the GVD figure and are often ignored. These include: Infrastructure Levy; costs associated with section 106 agreements; environmental mitigation; remediation of the land, contractor fees.
It would be possible to consider scheme viability based upon a landowner expectation (including hope value) versus an existing use value capped approach. The difference could be included in viability modelling and used to identify additional public benefit which could be achieved. For example, to achieve higher levels of affordable housing, and/or investment in additional local/strategic infrastructure such as education or health facilities.

Government response

105. The government acknowledges comments that the direction process could apply to schemes led by providers of affordable housing which demonstrate significant levels of public benefit. This has been taken into account in the government’s response under question 6.

106. The government notes the responses relating to:

(a) the disadvantages of the direction process being a separate administrative process including increased costs, delay, and uncertainty;

(b) directions should be applied for at the same time as the CPO is made, and

(c) the direction process should be clear, with set timescales and the ability for landowners to make representations and claim reasonable costs.

These issues were considered as part of the government’s response under question 10.

107. In relation to responses submitted that directions would reveal the lack of viability of schemes which could lead to objections and delay the use of compulsory purchase powers, the government is of the view acquiring authorities will need to provide evidence to demonstrate why removal of hope value in a specific scheme is necessary to make it viable to deliver public benefits as part of the justification in the public interest. Furthermore, that without this evidence it will be difficult for acquiring authorities to demonstrate that the public interest justification test has been met.

Conclusion

108. The government in proceeding with its direction proposal will ensure:

(a) the direction process will allow for the recovery of reasonable costs by landowners and for challenges to be made to the making of directions; and

(b) the direction process is combined with the making of a CPO (including its submission to the Secretary of State for confirmation) to avoid adding complexity and uncertainty to the CPO process.

Question 5

Alternative proposals

Accepted Answer

109. The consultation invited views as to whether the proposals set out should go further and look to cap or remove hope value generally or in relation to specific types of schemes.

Question 14: Do you think the proposals should go further and automatically limit the payment of hope value in compulsory purchase more generally or in relation to specific types of schemes? Please provide details and justification as to why you think it would be in the public interest to go further and what public benefits could be delivered if hope value was limited. Examples of types of schemes, for example regeneration, you think any further general application should apply to would also be helpful.

Table 19: Statistical summary of responses to question 14

Organisation	Yes (subject to comment)	Yes	Not Sure	No	Total
Community Organisation	0	0	0	1	1
County Council	0	2	1	0	3
Developer	1	2	2	6	11
District/borough Council	1	1	2	1	5
Individual	0	2	3	31	36
Landowner	0	0	5	3	8
Other	0	2	4	3	9
Other Public Sector	1	8	1	1	11
Professional Association/ Industry representative body	2	6	5	8	21
Professional Institute/Professional e.g. planner, consultant	1	3	2	11	17
Unitary Council	0	2	0	0	2
Voluntary/charitable sector	1	0	1	1	3
Total	7	28	26	66	127

Table 20: Total number of respondents indicating a response to question 14

	Yes/Yes (subject to comment)	No	Not Sure	Total
Total number of respondents indicating a response	35	66	26	127
Overall percentage	28%	52%	20%	100%

Summary of responses

110. The majority of responses to the question (almost half of all respondents) raised significant objection to the suggestion that the proposals should go further and automatically limit the payment of hope value in compulsory purchase more generally or in relation to specific types of schemes. Whilst over a third of all respondents were unsure.

111. Respondents to question 14 who disagreed that the proposals should go further provided the following comments:

There are concerns about the decision to move away from the compensation principles established by the Land Compensation Act 1961. Increasing the scope of capping would make the proposal even less acceptable.
The proposed changes to hope value would see less land coming forward for development and add time and complexity to the CPO process. It would also pose a threat to human rights, potentially resulting in lengthy legal challenges.
The removal or capping of hope value should only be permissible in certain specific circumstances where there is a compelling case and justification in the public interest. It should not have a blanket application.
Each case will be different, particularly in relation to viability, so it would be inappropriate to seek an automatic limit to compensation payments.

112. Respondents to question 14 who agreed made the following statements:

Developers often work with local authorities so they can compulsorily purchase additional land to facilitate better planning of a scheme, particularly where access is concerned. There have been instances of minority landowners frustrating schemes in expectation of excessive land payment. This approach is based on the case law set out in Stokes v Cambridge where the “hope value” is disproportionate to the size and inherent value of the land. A specific exemption is needed from paying ransom or hope value on land which is needed purely to provide greater public access to development sites which are allocated in a local plan.
Hope value should be limited to all schemes subject to a CPO. This should then be reassessed upon completion and, where it can be demonstrated that:

(a) the development is able to deliver its full obligations in respect of s106, CIL, affordable housing;

(b) any other planning requirements in relation to design standards etc; and

(c) where the development is making over and above what is identified as a reasonable return, any profit above a reasonable return should then be released as additional land value. It could result in more instances of land being acquired by an agreement.

113. Other responses were received to question 14 which were not relevant to the question asked.

Government response

114. The government agrees the removal of hope value from CPO compensation should be considered on a case-by-case and only where it can be justified in the public interest. As outlined in the government’s response to question 9, the government does not consider it would be proportionate to remove hope value compensation in all compulsory purchase instances. It does believe however that there may be certain types of development where the removal of hope value will enable schemes to be brought forward to deliver public benefits which otherwise may not be possible.

115. The government does not agree the removal of hope value from CPO compensation in some cases will result in less land being brought forward for development. CPOs, including those with a direction, should only be used as a last resort where negotiations have failed. As such, CPOs are not widely used when compared to the wider volume of transactions in the property market and the government believes the impact of its direction proposal on private developers’ schemes will be minimal. Also, before the Secretary of State confirms a CPO with a direction, acquiring authorities will be required to demonstrate through evidence that the removal of hope value for that scheme is justified in the public interest. As set out in the government’s response to questions 7 and 11, it is of the view the use of directions should be restricted to three types of CPOs and certain public sector acquiring authorities only e.g. local authorities, Development Corporations, Homes England, Greater London Authority. As such, they will form a small subset of all CPOs that come forward which is unlikely to alter developer behaviour more widely on open market transactions.

116. The government agrees the removal of hope value should only be permissible in certain specific circumstances where there is a compelling case and justification in the public interest. As stated in the government’s response to questions 6 and 7, the government when proceeding with its proposal on the use of directions will ensure the primary legislation implementing the proposal enables acquiring and confirming authorities to undertake full proportionality assessments so they can be satisfied that a fair balance has been struck in each case between the rights of affected individuals and the general interests of the community before directions are confirmed.

117. The government notes the comments made that it would be more effective for acquiring authorities to offer more compensation than market value. The government considers the use of directions on a scheme-by-scheme basis will be an optional mechanism which acquiring authorities may choose to utilise at their discretion.

As such, acquiring authorities could choose not to apply for a direction and instead proceed with acquiring land via a voluntary agreement secured by negotiation or compulsory purchase on the basis of paying compensation reflecting the prospect of planning permission i.e. hope value.

Question 6

Next steps

Accepted Answer

118. Reflecting consultee responses summited to questions 3 – 14, and the government response, the government will proceed with its direction proposal via primary legislation in the following way:

Certain public sector acquiring authorities (‘eligible acquiring authorities’), such as local authorities, Homes England, Development Corporations and Greater London Authority, when exercising specified CPO powers will be able to seek from the Secretary of State, on a scheme-by-scheme basis, directions that the assessment of land value as part of a claim for compensation in the following types of schemes is to take no account of the prospects of planning permission being granted (hope value) or establishing appropriate alternative development via a Certificate of Appropriate Alternative Development:

(i) affordable (including social) housing,

(ii) education provision,

(iii) health facilities.

Where eligible acquiring authorities wish to seek a direction from the Secretary of State they will be required to:

(a) provide evidence to demonstrate the payment of compensation without hope value would be justified in the public interest,

(b) make their request at the same time as the making of the CPO i.e. when the CPO is submitted for confirmation, and

(c) when serving statutory notices on qualifying persons under section 12(1)(a) of the Acquisition of Land Act 1981, give notice of their intention to seek a direction.

The confirmation of a CPO including a direction by the Secretary of State will not prevent landowners from claiming compensation for planning permissions which are in force on the relevant valuation date.
Landowners will be able to:

(a) claim compensation for other heads of claim associated with the compulsory purchase of their land i.e. disturbance, loss payments and severance/injurious affection,

(b) make objections to, and request inquiries into, a CPO which includes a direction;

(c) submit an application to the High Court to challenge the confirmation of a CPO which includes a direction; and

(d) claim reasonable costs incurred in associated with objecting to a CPO which includes a direction.

119. The government will consider what other safeguarding mechanisms could be implemented to ensure the use of directions deliver the intended outcomes. Such mechanisms could include allowing landowners to apply to the Secretary of State for additional compensation where an acquiring authority does not deliver its scheme in accordance with the purpose behind the making of the direction.

120. The government will provide guidance on:

(i) how directions may be applied for including the requirement for landowners to be notified of the making of a direction and for them to be able to make objections;

(ii) what an acquiring authority ought to be able to demonstrate to justify a direction, such as: (a) how a scheme will deliver public benefits, and (b) how the removal of hope value from compensation is justified in the public interest;

(iii) what is meant by ‘in the public interest’ and ‘public interest test’;

(iv) clarifying the distinction between net profit from the sale of land and Gross Development Value including the figure which must be included in evidence supporting a direction and the removal of hope value; and

(v) how it would not be proportionate in the government’s view for a direction removing hope to assist the profits of a private sector development partner.

121. The government’s direction proposal will apply on an England and Wales basis. As such, references to the Secretary of State in this government response, for Wales, should be read as references to the Welsh Ministers.

Question 7

Equality impact assessment

Accepted Answer

122. The consultation sought views on whether there are potential equalities impacts arising from any of the proposal.

Question 15: Do you have any comments on the initial equality analysis? If yes, please provide your views on the equality impacts arising from this proposal and any suggestions for how those impacts could be mitigated (please include any evidence you may have in support your views).

Summary of responses

123. Of the 127 respondents to the consultation, 27 provided a response to question 15, 17 of which were not relevant to the question asked. The 10 responses which were related to the question asked can be summarised as follows:

The impact of capping hope value could be utilised by both parties to a CPO. For example, acquiring authorities could argue the capping of hope value may help provide financial assistance for claimants to remain in the community. Claimants may challenge a direction on the basis they have protected characteristics which will be affected by the cap. Mitigation can only be achieved by early evaluation of the equality impacts in each case prior to a direction being applied for.
The equalities impacts of a scheme should be fully considered before the issue of a direction so not to discriminate against those who are not well resourced and/or possess the relevant knowledge. Such individuals or communities could be disproportionality affected, particularly if they possess protected characteristics. Adverse equalities impacts could, for example, be mitigated by restricting the scope for capping hope value on a scheme-by-scheme basis, taking into account the type of scheme.
Some land acquisitions displace people from their social and financial support structures. It is imperative any direction issued has fully considered the impacts and consequences on marginalised communities. There must be a robust assessment, evaluation and mitigation before a direction is issued.
Increasing public benefits through exercise of compulsory acquisition powers to deliver housing and regeneration schemes will have positive impacts on improving equality. For example, increasing the supply of affordable housing will benefit those most likely to be negatively impacted by high housing costs and/or poor housing conditions. This includes people from Black, Asian, and minority ethnic backgrounds, deaf and disabled people, and young people.
The analysis provided in the consultation suggests the equalities implications of the capping of hope value can be dealt with on a scheme-by-scheme basis prior to the issuing of a direction. This is not supported if every equalities impact needs to be considered at an early stage prior to the confirmation of a CPO.
The conclusion appears to rely on the proposition that the reduction of compensation might lead to beneficial effects in some cases for those with protected characteristics. This appears to be speculative rather than based on evidence or analysis.
The initial equalities analysis is too high-level and lacks specific details. Further equalities assessments will be required as this proposal progresses.
There would be inequality as landowners who are subject to a direction would be discriminated and disadvantaged compared with owners who are not. The ‘values’ and ‘metrics’ underpinning the equality analysis are flawed.
We disagree with the proposition there is equal potential for adverse and beneficial effects for persons with protected characteristics. The impact on a person having land taken from them without full or fair compensation would be far greater than any benefits a scheme might have for them.

Government response

124. The government notes a mix of responses were received to question 15 including concerns raised about how the removal of hope value from compensation could impact unfairly on persons with protected characteristics. Based on the evidence put forward by respondents, the government considers it cannot envisage how the proposal will have a differential impact on those with protected characteristics as compared to those who do not share those characteristics.

It is also of the view that its proposals will allow for a full assessment by the Secretary of State on a scheme-by-scheme basis of the balance between the impact on affected people and the public interest benefit in the scheme.

125. The government will keep the matter under review and should the proposal be taken forward via primary legislation, it will be considered further through the preparation of a full impact assessment.

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Foreword

Summary of responses

Table 1: Number of consultation responses

Table 2: Consultation questions

Further reform

Table 3: Statistical summary of responses to question 3

Table 4: Total number of respondents indicating a response to question 3

Summary of responses

Government response

Conclusion

Summary of responses

Government response

Conclusion

Table 5: Statistical summary of responses to question 5

Table 6: Total number of respondents indicating a response to question 5

Summary of responses

Government response

Conclusion

Table 7: Statistical summary of responses to question 6

Table 8: Total number of respondents indicating a response to question 6

Summary of responses

Government response

Conclusion

Consultation proposal

Table 9: Statistical summary of responses to question 7

Table 10: Total number of respondents indicating a response to question 7

Summary of responses

Government response

Conclusion

Table 11: Statistical summary of responses to question 8

Table 12: Total number of respondents indicating a response to question 8

Summary of responses

Government response

Conclusion

Summary of responses

Government response

Conclusion

Table 13: Statistical summary of responses to question 10

Table 14: Total number of respondents indicating a response to question 10

Summary of responses

Government response

Conclusion

Table 15: Statistical summary of responses to question 11

Table 16: Total number of respondents indicating a response to question 11

Summary of responses

Government response

Conclusion

Table 17: Statistical summary of responses to question 12

Table 18: Total number of respondents indicating a response to question 12

Summary of responses

Government response

Conclusion

Summary of responses

Government response

Conclusion

Alternative proposals

Table 19: Statistical summary of responses to question 14

Table 20: Total number of respondents indicating a response to question 14

Summary of responses

Government response

Next steps

Equality impact assessment

Summary of responses

Government response

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