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Legal landscape: Why CPOs are unlikely to break the bank

Are compulsory purchase orders (CPOs) the answer to the problem of land banking, as the government suggested in the Autumn Budget? It’s not as simple as it looks, say Vicky Fowler and Toni Weston

In the Autumn Budget, chancellor Philip Hammond announced plans for a review into land banking, which included the potential use of compulsory purchase powers. Land banking is the practice of buying undeveloped land purely as an investment, thereby preventing it from being developed to deliver new housing.

Would the use of a CPO to curb such practice, however, be workable?

Guidance states that a CPO should only be made as a last resort, where there is a compelling case in the public interest. The delivery of housing is clearly in the public interest and is at the core of national planning policy. 

Moreover, local authorities have specific powers to acquire land and property for housing, as does Homes England

In justifying the use of a CPO it would, however, be necessary for the acquiring authority to demonstrate that: 

  • its proposals for disposal and development of the land being acquired;
  • how that will achieve the provision of housing accommodation; and
  • when the provision is likely to materialise.

"It makes sense for housebuilders to have a forward pipeline of sites at various stages of the planning and development process"

This means that the acquiring authority must have a strategy and/or the means to deliver the new housing on the land before embarking on a CPO. This is often demonstrated by the local authority working in partnership with the private sector, which will ultimately be responsible for delivery of the proposals.

Under current guidance, the Secretary of State for Communities and Local Government, deciding on whether or not to confirm a CPO, must consider any alternative proposals that may have been put forward by the landowner or by other persons for the use of the land, and whether they are likely to be or are capable of being implemented.

Any CPO of land held or controlled by housebuilders could therefore fail in the event of an objection by the housebuilder that it has the intent, capability and track record to bring forward housing development on the land.

This raises the question of how you establish whether land is actually being banked so that, on balance, housing is more likely to be achieved if the land is compulsorily acquired. What are the criteria for stating that land is actually being banked? Land is critical for house building and so it makes sense for housebuilders to have a pipeline of sites at various stages of the planning and development process. A pipeline of sites over a typical period of five to six years is arguably not unreasonable given how long it can take to secure planning permission on a housing site.

Faced with the threat of a CPO, there is nothing to prevent the affected housebuilder from making moves to develop, or in the case of a non-housebuilder, making moves to sell the land while the CPO is considered. Given that the compulsory purchase process can take anything from 18 months to two years, any affected landowner will have more than ample warning and time to take such steps.

The secretary of state would have regard to such activity in deciding whether, on balance, development of the land is more likely to be achieved if the land is compulsorily acquired. This makes the CPO process riskier and less certain, and, given its costs, may deter some local authorities from even embarking on it.

Another potential deterrent to any local authority considering a CPO will be the potential cost of any compensation payable to the affected landowner. The amount of compensation will be the market value of the land, taking into account any planning permission that has been secured by the landowner or any development value. This could make it more difficult for the local authority to secure the necessary funding or support from the private sector to make the case for the CPO.

On balance, and given the time and the tests to be met to secure a successful CPO, it is certainly hard to see that the threat of compulsory purchase will have the teeth to deter the practice of land banking  
Vicky Fowler is planning partner with Gowling WLG and chair of the Compulsory Purchase Association. Toni Weston is director of planning with Gowling WLG.

image credit | iStock


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