Compulsory purchase and council homes – a new direction for housing policy?
16 May 2017
In the last few months an exciting shift has taken place in in the debate about housing, one underlined by this weekend’s commitments to new council house building and to reform of compulsory purchase order (CPO) legislation.
This announcement is a genuine break from the previous government’s reliance on private developers to deliver the homes that we need. It also demonstrates clearly that patience with the big developers is running thin – and the expectation that they will deliver has faded.
In committing to these measures the Conservatives are taking a new approach and acknowledging that lower land costs are key to building more and better homes. The ability to assemble land at a lower value means that it will cost less to fund a new programme of building. It will also ensure that the rise in the value of land – which is created by the public investment – actually benefits the public by being captured for their benefit.
Only a couple of years ago the situation from Shelter’s perspective was bleak and the possibility of a programme of council house building or of compulsory purchase reform seemed remote.
We have been campaigning hard for a shift in approach for a long time, encouraging all politicians and parties to put increasing supply front and centre in their housing policy. The change in tone and in focus that we are now seeing shows that the positions we have taken during this period are now the consensus, and that a diverse spectrum of politicians are open to more radical ways of tackling the housing shortage. This is not least because the speculative model, which we currently rely on to build homes, simply isn’t able to deliver on the scale we need.
In particular, it is encouraging that we are talking about increasing social housing stock by building new council homes – something that will directly help those on the lowest incomes, a group that for too long have been left behind in housing. Ensuring that those on low incomes have access to safe, secure and affordable housing is an important goal and we hope that such a moment is getting closer.
As with all things the devil will inevitably be in the detail, however, the noises and commitments of recent days are encouraging and suggest real and radical change might be on the way.
How does compulsory purchase enable this?
A new programme of council house building is not easy, and at the heart of what has been announced to enable this is reform of the legislation governing CPO to allow local councils to assemble land at a lower cost than they are currently able.
This is something that Shelter and others have long wanted to see. However, already we have seen the argument being made that reforming compulsory purchase to redefine how market value of a site is calculated would be subject to legal challenge on the basis of the Human Rights Act. Yet countries such as Germany and the Netherlands have planning systems that already allow for land value uplift to be captured using compulsory purchase by bringing land into development at a lower value. This, therefore, demonstrates clearly that this can be done. In addition, it is well-established that a strong public interest case to capture the land value for public benefit overrides Article 1 of the Human Rights Act. Given the scale of the housing shortage and affordability challenge we face, there is now a clear public interest case for taking action in the UK.
A smarter use of compulsory purchase is also far from a modern idea. In the 1870’s Joseph Chamberlain as Mayor of Birmingham used compulsory purchase to assemble land cheaply and to ensure profit came in the form of public benefit. He said “we shall get our profit indirectly in the comfort of the town and in the health of the inhabitants”.
This ambition – to capture the value of land and use it for the public good – should be central to how compulsory purchase works in the future.
Reforming compulsory purchase would mean that landowners get paid a fair price for what their land is – rather than an inflated price that incorporates a hope value based on what their land could be. As we’ve noted, this would unlock considerable sums of money for affordable housing and important infrastructure.
To have the chance to talk seriously about reforming compulsory purchase is a huge opportunity, and one that at Shelter we are excited by.
In March our New Civic Housebuilding report laid out a vision for what lower land costs would mean in terms of unleashing a new wave of community minded housebuilding. That report made clear that compulsory purchase needed to become a credible threat as part of this, and with the proposed reform the Civic Housebuilding vision can become a reality.
The things that Shelter has been campaigning for are now central to the political debate on housing – and we are determined to keep pushing to make sure the promises are delivered.
 More on this can be found in our memo on the use of CPO to finance infrastructure and new homes.