Compulsory purchase compensation: Power to remove hope value
A factsheet explaining the power to remove hope value from the assessment of compulsory purchase compensation
Applies to England
Compulsory purchase is a legal mechanism by which certain bodies (known as ‘acquiring authorities’) can acquire land without the consent of the owner. Compulsory purchase can support the delivery of a range of development, regeneration and infrastructure projects in the public interest.
In the Levelling-up and Regeneration Act 2023, a power was introduced to allow for the assessment of compensation for the value of land taken by compulsory purchase to ignore values attributable to the prospect of planning permission (‘hope value’) in certain circumstances. This factsheet explains the power and how it can be used. See detailed guidance on the compulsory purchase process.
1. What is ‘hope value’ and how may it be removed from compensation for land taken?
Compensation paid to a landowner where land is compulsorily purchased will reflect the value of the land if it had been sold on the open market (‘open market value’) by a willing seller at the valuation date.
The assessment of compensation will ignore any increase or decrease in value caused by the scheme underlying the compulsory purchase (e.g. regeneration project, housing, new road, railway line etc) or the prospect of that scheme. This is known as the ‘no scheme principle’.
When assessing the open market value of land compulsorily purchased, account may be taken of values attributable to the prospect of planning permission being granted on the land in the future. This is often referred to as “hope value”. A landowner has 2 different ways of claiming hope value either reflecting:
- the prospect of a planning permission being granted on the land for an alternative use or development; or
- appropriate alternative development being established on the land for which planning permission may be assumed
The power introduced by the Levelling-up and Regeneration Act 2023 allows acquiring authorities to include in their compulsory purchase orders (CPOs) directions which allow hope value to be removed from the assessment of compensation for land taken where doing so is justified in the public interest.
2. What are the types of schemes facilitated by use of compulsory purchase powers which directions to remove hope value may be sought on?
Directions to remove hope value can facilitate the acquisition of land at existing use value for provision of housing, development or regeneration schemes where they include public sector led affordable or social housing, health or education uses, and are justified in the public interest.
Directions are targeted at these types of schemes as benefits from not paying hope value (i.e. full open market value) for land are delivered directly to the public.
3. Which acquiring authorities can seek directions to remove hope value?
Directions to remove hope value may be sought by the acquiring authorities listed below where they are facilitating the relevant scheme through use of the associated compulsory purchase power:
a. Development/regeneration/housing/new towns schemes where provision of affordable or social housing is being facilitated (which can be as part of a mixed tenure development):
- Greater London Authority – section 333ZA of the Greater London Authority Act 1999
- Homes England – section 9 of the Housing and Regeneration Act 2008
- local authorities – section 226 of the Town and Country Planning Act 1990
- local housing authorities – section 17 of the Housing Act 1985
- mayoral development corporations – section 207 of the Localism Act 2011
- new town development corporations – section 10 of the New Towns Act 1981
- urban development corporations (including locally-led development corporations) – section 142 of the Local Government, Planning and Land Act 1980
- Welsh ministers – section 21A(1)(c) and (2)(c) of the Welsh Development Agency Act 1975
b. Acquisitions for purposes of the NHS:
- local health boards and NHS trusts (in Wales) – paragraph 20 of Schedule 2 and paragraph 27 of Schedule 3 to the National Health Service (Wales) Act 2006
- NHS foundation trusts – paragraph 46 of Schedule 4 to the Health and Social Care (Community Health and Standards) Act 2003
- NHS trusts – paragraph 27 of Schedule 4 to the National Health Service Act 2006
c. Acquisitions for educational institution or function purposes:
- local authorities – section 530 of the Education Act 1996
4. How can acquiring authorities apply for directions to remove hope value?
Acquiring authorities may seek a direction to remove hope value by including a direction in a CPO when it is submitted for confirmation either to the Secretary of State for land in England or the Welsh ministers for land in Wales.
In seeking a direction to remove hope value, acquiring authorities must demonstrate there are compelling reasons why the inclusion of the direction in the CPO is justified in the public interest.
Acquiring authorities should ensure the public benefits to be delivered through the assessment of compensation for land without hope value are appropriately and clearly described in a Statement of Commitments (which must be submitted alongside a CPO which includes a direction to remove hope value). Authorities should fully evidence the public benefits expected to be delivered as a result of the non-payment of hope value, setting out where appropriate the public needs they will meet, the impact on affected landowners, and how a fair balance between public and private interests will be reached.
Guidance on the evidence which acquiring authorities should consider providing is available in the guidance on the compulsory purchase process.
5. What will be the effect of the confirmation of a CPO which includes a direction to remove hope value?
Where a CPO which includes a direction to remove hope value is confirmed, an assessment of compensation relating to the value of land being acquired must assume that no planning permission would be granted for development on the relevant land. This means the assessment of the value of land may not take account of:
- the planning certainty of appropriate alternative development being established on the land by the granting of a Certificate of Appropriate Alternative Development (CAAD); or
- the prospect of planning permission being granted for other development on or after the relevant valuation date
The assessment of the value of land may take account of any existing planning permission on the land.
6. What happens if the acquiring authority fails to build out its scheme which benefited from a direction that removed hope value?
An eligible person (i.e. a person who had their land or an interest in land acquired via a CPO which included a direction to remove hope value) can submit an application to the Secretary of State to make a direction for additional compensation if it appears all of the following conditions have been met:
- the acquiring authority has not fulfilled its stated intentions on what it was going to do with the land included in the CPO when it was confirmed with the direction to remove hope value
- either the period of 10 years beginning with the date on which the CPO became operative has expired or there is no longer any realistic prospect of the acquiring authority’s stated intentions being fulfilled within that period; and
- the initial direction to remove hope value would not have been confirmed based on what the acquiring authority has done with the land since its acquisition
7. When will additional compensation be payable?
Additional compensation will be payable to an eligible person if:
- the amount of compensation that would have been assessed in respect of the acquisition of the land had been done so if hope value or the ability to apply for a CAAD hadn’t been removed from compensation payments (“the alternative amount”); and
- that amount is greater than the amount of compensation awarded or agreed to be paid to the eligible person in respect of the compulsory purchase of their land or interest in land which was subject to the initial direction (“original amount”)
Where additional compensation is payable, the amount payable will be the difference between the alternative amount and the original amount.