Labour to reform land valuation to make new developments cheaper

Labour is reportedly planning a major overhaul of compulsory purchase rules in a bid to cut homebuilding costs if the party wins the next general election. 

Shadow levelling up secretary Lisa Nandy (pictured) is drawing up plans to force landowners to sell plots of land for under the market value, according to a Labour aide quoted in the Financial Times. 

The reported proposals would change how land is valued when it is acquired by local authorities via compulsory purchase orders (CPOs).

These intended reforms go beyond the Conservative government’s recent decision to make it possible for landowners to sell their land more cheaply “in certain cases involving affordable housing, health or education.”

CPOs allow local authorities or other public bodies to force property owners to sell the land they own for critical development, regeneration and infrastructure projects.

Under the current 1961 Land Compensation Act, local councils are prevented from buying land for housing at its agricultural value.

Instead, it must be acquired at a “hope value” which reflects the amount a seller might be expected to realise “on the open market”. This takes into consideration the value of the land if planning permission for residential usage were to be granted.

A Labour government would reportedly introduce new legislation allowing councils to buy land at its agricultural value.

“We want local areas to capture and benefit from a lot more of the uplift than they currently do when development occurs,” an unnamed Labour aide told the FT.

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“We want to tilt the balance of power. It feels like the scales are tilted towards […] landowners, we want to re-tilt it towards the communities that want to see more houses built.”

An amendment to the Levelling Up and Regeneration Bill tabled by the government earlier this year means the government can implement CPOs without paying the landowner any “hope value” on limited occasions.

The proposed Labour reforms would constitute a more widespread change in CPO usage with the intention of meeting housebuilding targets and making development costs cheaper. 

A Department for Levelling Up, Housing and Communities spokesperson told Housing Today: “We want councils to be able to unlock more land for affordable housing, which is why we are reforming compensation for compulsory purchase orders.

“The current rules can significantly increase costs for councils and our reforms will ensure the taxpayer gets best value for money, by removing ‘hope value’ where justified and in the public interest.

“It will ultimately be for the secretary of state to decide whether a compulsory purchase order can be approved and if the removal of hope value is appropriate.”

Housing targets are likely to be a key theme in the run up to the next general election. 

Earlier this month Labour leader Keir Starmer accused prime minister Rishi Sunak of “killing the dream of home ownership for a generation.”