There are two things that members will probably not want to read: Part 7 of The Leveling up and Regeneration Bill, currently in Parliament, and the Department for Levelling up, Housing and Communities (DLUHC)’s consultation on compensation reforms. Both of these measures are seeking to reduce the compensation paid to landowners when they have their land acquired by compulsion, while the acquiring institutions can gain from the process.
Compensation is supposed to put you back into the same situation, as far as money can, as you were before the scheme came into existence. The Levelling Up and Regeneration Bill tries to reframe this so that the compensation ignores any value arising from previous infrastructure schemes (new roads, railway stations, etc.). Development often happens piecemeal over many years. It would be fundamentally wrong to apply an under-value for any future, unconnected compulsory acquisition when another buyer in the open market would pay full price for the land and still make a profit from the resultant development.
Understanding hope value
The consultation on compulsory purchase compensation is about the government being misinformed that hope value is not real value. The reality is that hope value – which describes the market value of land based on the expectation of getting planning permission for development - is real value, but it is artificially spilt from land value by the valuation practice in compensation cases. The government wants a system where as close to existing use value is paid. The government is looking to make anyone claiming a higher value meet the costs of an application for a Certificate of Appropriate Alternative Use, at their own expense, before considering anything other than existing use value.
Perhaps these proposals could be balanced by removing the penalty for betterment, which is often deducted from compensation when a compulsory purchase scheme unlocks any future development value for the landowner.
Common standard for compulsory purchase data
The good news is that in the Levelling Up and Regeneration Bill, the DLUHC is proposing a common standard for recording compulsory purchase data. As long as this is applied to current Development Consent Orders and the existing High Speed Rail Acts it will be a beneficial step. HS2ltd are masters at delaying payment of compensation while hiding any performance data on how quickly compensation is paid. I suspect that when they say they have little data on Injurious Affection payments it might be correct because they appear to have paid little to rural areas despite the scheme having been ongoing for well over a decade.
We will be opposing the changes to the compulsory purchase measures within the bill and will be briefing MPs and peers on the impacts of the changes. We will also be seeking to meet DLUHC and respond to oppose the changes proposed in the consultation.
If the state exercises the power to remove property, it must recognise the impact it has on the businesses and the individuals who lose that land and compensate them adequately. It is true to say that everyone who is touched by compulsory purchase comes away feeling in some way damaged. There is basic unfairness here: the landowner is the only party in the whole development process who is forbidden from making any money from having land taken, while consultants, contractors and developers always do very well out of it.
Paying less for land is not leveling up - it will drag businesses down.