Local Authorities (LAs) are under increasing pressure to provide affordable and social housing across the UK and the rising cost of land is a contributing factor preventing the growth of this type of housing. The Town and Country Planning Act 1947 sought to remedy this by allowing Councils to compulsorily purchase land at its existing land value, but growth was slowed down by the introduction of the Land Compensation Act 1961 which awarded compensation to landowners who were affected by compulsory purchases.  

In this insight we summarise the recent amendments to The Levelling-up and Regeneration Act 2023 (LURA) which came into force on 1 May 2024 and how these changes affect the way LAs deal with Compulsory Purchase Orders, provide social housing and compensation to landowners.

What is a Compulsory Purchase Order (CPO)?

A CPO is a process by which certain organisations who are known by law as “acquiring authorities”, and which include Councils, can purchase land without the consent of the landowner. The aim of a CPO is to facilitate regeneration and development within communities. Land must therefore be purchased in the public’s interest.

CPOs can be made by individual Councils, but they must receive the approval of the Secretary of State. In order to obtain Secretary of State approval, the Council must prepare all information about the land, its proposed use and reasons why a CPO is necessary and serve a notice on the current landowner. The landowner then has the opportunity to challenge this order.

The Land Compensation Act 1961 requires acquiring authorities to pay compensation to any landowner who has had their land compulsorily purchased for:-

1. the amount the land would be worth in the open market
2. an amount to the value of any prospective planning permission to redevelop the land and therefore an estimate of what the land may be worth once developed. This is also sometimes referred to as ‘hope value’. Hope Value compensation can still awarded even where the landowner has not applied for planning permission.

Councils are therefore liable to pay an increased amount for land based on the estimated ‘hope value’.

The Changes to the LURA

The Levelling Up and Regeneration Bill introduced in October 2023 addressed the proposed changes to be made to the compulsory purchase process.

In particular, Section 190 allows acquiring authorities to include in certain CPOs (affordable housing, education and health) a direction to the Secretary of State which seeks to disapply section 14 of the Land Compensation Act 1961 and effectively ignore any hope value.

The intention behind the changes set out in the LURA is to allow acquiring authorities to use the CPO mechanism to purchase land in a more cost effective way. Acquiring authorities are required to provide the Secretary of State with a Statement of Commitments detailing what they hope to achieve with the proposed land in the following 10 years. The acquiring authority will also need to meet all the tests for CPO and show a compelling case in the public interest, including attempting to acquire the land by agreement. If this can be demonstrated, the Secretary of State may be mindful to discharge the requirement to pay for hope value. Failure to achieve the aims of the statement may allow landowners to claim compensation.

The potential issues

The changes to LURA have not yet been tested in law, but we set out some potential pitfalls which we can foresee and which developers are fearful of.  

It is not clear how long, in practice, the application to apply for Secretary of State approval without providing for hope value will take or what exactly it will entail. The concern being that Councils will become inundated with applications. 

It is also not entirely clear what will be deemed to be in the public interest.

It is worth bearing in mind that landowners still retain the right to object to compulsory purchases within the updated legislation which means there is a risk of lengthy and expensive judicial review.

How Capsticks can help

We have extensive knowledge of Compulsory Purchase Orders and Judicial Reviews and are happy to support local authorities navigating the complex process of applying for CPOs and enabling councils to purchase suitable housing for its needs as well as dealing with any risks of Judicial Review.

Please speak to Suzanne Smith, Tiffany Cloynes, Rebecca Gilbert or Chantal Davison to find out more about how Capsticks can help.