What does a Labour government mean for compulsory purchase of land?

Addressing the 2023 Labour Conference, then-opposition leader Sir Keir Starmer described “our restrictive planning system” as “a blockage” to essential infrastructure, and “an obstacle” to house building, declaring: “Conference, we must bulldoze through it”.[1] Echoing this statement, Labour’s 2024 manifesto pledges to get Britain building again, aiming to deliver critical social infrastructure and 1.5 million homes within the next Parliament. Though light on detail, the manifesto suggests that these ambitions will be supported by reducing the cost of compulsory purchase orders by reforming landowner compensation rules.

This article explores the context and potential implications of the new government’s proposals on compulsory purchase. You can read more about the Government’s approach to housing here.

What are Compulsory Purchase Powers?

The power of certain bodies (“acquiring authorities”) to obtain private land without the owner’s consent is one of the more highly regulated and controversial aspects of land law. Exercised through compulsory purchase orders (CPOs), the power is intended to prevent individual property rights obstructing the exercise of acquiring authorities’ statutory functions. Typically, CPOs are made to unblock development or infrastructure projects deemed to benefit the greater public good.

For the most part, Parliament has developed the legislation governing CPOs cautiously; aiming to strike a balance between the public interest and the rights of private landowners. Still, CPOs remain a politically contentious issue, particularly in relation to how affected landowners should be compensated.

What changed under the Conservatives?

One of the most significant sources of contention is the concept of ‘hope value’, which contributes to the compensation paid to landowners by attributing value to prospective planning permission on the acquired land. This introduces uncertainty to the valuation of land acquisitions, often resulting in contested compensation claims, and is generally suggested to impede regeneration and infrastructure projects.

The Levelling-Up and Regeneration Act 2023 (LURA 2023) aimed to streamline compulsory purchase procedure to make projects delivering clear public benefits more economically viable. The most consequential change was to allow acquiring authorities to disregard hope value when acquiring land for housing (especially, “affordable housing”)[2], education or NHS purposes.[3] This power inevitably risks disadvantaging landowners who hold (and may borrow on) land for its speculative value, but must sell at its existing use value. Recognising this, the Act requires acquiring authorities to justify that their use of this power is in the public interest.

What can we expect from the new Labour Government?

In its 2024 manifesto, the new Labour government pledged to further reform CPO compensation rules. Their aim is to ensure that, for specific types of development schemes, landowners are awarded “fair compensation”, rather than “inflated prices based on the prospect of planning permission”.[4] The types of schemes affected by the proposal are not identified, however the manifesto claims that the reforms will deliver “housing, infrastructure, amenity, and transport benefits”.

It seems that Labour will extend acquiring authorities’ existing powers to disregard hope value beyond their current limitations (housing, health and education), to a potentially wide range of public infrastructure projects. This is in keeping with the general spirit of Labour’s economic growth plan, which includes making roads, railways, reservoirs, and other major projects faster and cheaper by “slashing red tape”.[5]

Although it is likely that an improvement in the ability to deliver infrastructure will indirectly assist with the provision of more housing, it is not a change which goes beyond what LURA did for housing.

Among the key issues that shaped this election cycle, the need for affordable housing took centre stage for many voters.[6] It is primarily in this context that Labour proposes its planning reforms. Labour aims to meet its 1.5 million new homes target by building a generation of new towns, urban extensions and regeneration projects; with a focus on increasing social and affordable housing. Labour has stated its intention to make “full use of intervention powers” to realise these ambitions.

It is worth remembering that new towns such as Milton Keynes were built on greenfield sites where there was little or no hope value to be taken into account, and as such much of the land was acquired at existing use value. Like any government with a majority, Labour has the latitude to do that again.

If the Manifesto pledge is to be taken forward, it appears to us that tweaking the need to justify that the use of the power to disregard hope value is in the public interest, might be the easiest way to advance that cause.

Final thoughts

Ultimately there are few surprises in Labour’s manifesto, which broadly aligns with the party’s messaging on the topic of land and planning, and reflects the promises of the last Labour conference. Labour’s proposed changes to CPO compensation rules aim to make the delivery of housing and infrastructure quicker and cheaper by reducing land receipts and investing the savings in new development. The strategy is effective but vague, and will draw opposition from landowners for making it significantly less profitable to own and/or purchase undeveloped land.

For Labour, it is a potentially uncomfortable circumstance that the removal of hope value to facilitate housebuilding, long promised as a shadow government, was substantially achieved by LURA 2023. As such, perhaps there will be an appetite to demonstrate more is being done, and extensions of the LURA changes might look an easy win. We query whether this would be enough to satisfy the calls of Labour’s progressive base to bring a swift and decisive end to the housing crisis.

We will revisit this topic as the new government’s proposals evolve into policy.

If you need assistance with any of the issues raised by this article, Michelmores has a wealth of experience in compulsory purchase law, and all aspects of property, planning and strategic land use. Please get in touch with  Mark Howard, Richard Walford, Helen Hutton, Fergus Charlton or Adam Corbin, who will be happy to help.

This article is for general information only and does not, and is not intended to, amount to legal advice and should not be relied upon as such. If you have any questions relating to your particular circumstances, you should seek independent legal advice.

[1] Keir Starmer, Labour Conference, Exhibition Centre Liverpool. 10 October 2023.

[2] Section 15A(5), Acquisition of Land Act 1981.

[3] Section 14A, Land Compensation Act 1961; Sections 15A and Schedule 2A, Acquisition of Land Act 1981; and sections 190(1)(c)-(d) and (2), LURA 2023.

[4] “Change” Labour Party Manifesto 2024, p 38.

[5] Ibid, p 32.

[6] In June, up to a quarter of voters polled by YouGov identified “housing” as the most important issue facing the country.