How ministers are resisting Parliament's push for more public sector land value uplift capture

The government has responded cautiously to MPs' calls for the public purse to capture more of the land value uplift generated by planning permissions. However, some minor innovations to make the compulsory purchase system more transparent are promised.

Development: government cool on further land value capture changes
Development: government cool on further land value capture changes

Late last month, the government published its response to the Commons housing, communities and local government select committee’s September report on land value uplift capture. The committee had recommended a major shake-up of the system of capturing uplift in the value of land generated by planning permissions. But in its response, the Ministry of Housing, Communities and Local Government (MHCLG) dashed hopes of radical change, saying it preferred to focus on reforming the current system of section 106 agreements and the Community Infrastructure Levy.

However, commentators identified two fresh announcements in the response, both relating to the compulsory purchase order (CPO) process. Firstly, the MHCLG said it will prepare a public online register of "current and past" CPO cases to "increase transparency around how CPO decisions are taken". It said the register would support monitoring of new timescales and targets for determining CPOs that were introduced by the Housing and Planning Act 2016 on 6 April 2018.

In addition, the MHCLG promised to "review and update" a series of "plain English" government guides to the CPO process that were originally published in 2004, "given that significant reforms have been implemented in the intervening period". The government "recognises that compulsory purchase is a complex area and there is limited awareness of how compensation is assessed in practice", it added.

Planning consultant Gilian Macinnes said: "I think the new measures will be very helpful to all involved - this is an area where there is a widespread lack of understanding. It needs to be demystified to make local authorities more inclined to use it in the public interest."

Jonathan Stott, chair of professional body the Compulsory Purchase Association, said: "We welcome the commitment to update information on the process and be more transparent on inspectors’ decisions when it comes to compulsory purchase so that there is greater understanding of the system."

Ian Fletcher, director of real estate policy at the British Property Federation, which represents property firms, added: "It is important that local communities understand the benefits they are deriving from the development process. CPO is a complex subject."

Some observers also said that the government had appeared to acknowledge for the first time that more substantial measures around land value capture could potentially disrupt development, at least initially. The government response said: "Changes to land value capture systems can have profound impacts on the land market in the short term, even where they are sensible for the longer term." While confirming that the government’s priority is to evolve the existing system of developer contributions, it said ministers "will of course continue to explore options for further reforms to better capture land value uplift, providing it can be assured that the short-run impact on land markets does not distract from delivering a better housing market".

Hugh Ellis, head of policy at campaign group the Town and Country Planning Association, said the MHCLG response continues the recent "mood music" of ministers accepting that landowners need to pay a fair proportion for the uplift in the value of their land due generated by planning decisions.

But he warned that, despite this, the government seemed scared to introduce any radical proposals because of potential resistance. He said: "You can see the fear factor. Every time in history the government has tried to reform land value capture, developers and landowners have said they would bring the system to a halt."

Also dissatisfied with the government response was Clive Betts, the select committee chair, who bemoaned the lack of action on revising compulsory purchase rules to "allow councils to acquire land at a fairer price".

However, planning barrister Richard Harwood QC, of 39 Essex Chambers, said changes to the CPO system are unlikely to achieve the result campaigners hope for. He said: "Compulsory purchase is a complete red herring in the land value capture debate as the compensation payable will have no effect on land prices for voluntary sales in the market which bring forward the vast majority of sites. Trying to cut compensation will simply make compulsory purchase more contentious and harder to achieve when it is necessary."

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