Labour’s warning to developers that they should use land or prepare to lose it may sound bold, but will it be any more effective than existing compulsory purchase powers?

Lee May

Does the Labour party’s proposed “use it or lose it” policy on landbanking make sense? There appears to be consensus on the need to unlock housing schemes that have planning permission but are not progressing. In addition to providing much needed housing to overcome the current shortage, there are potential benefits to the economy by stimulating the construction sector.

However, in considering the announcement from Labour, two key questions arise. First, how would their proposal work in practice? Second, and perhaps more importantly, would it be effective in bringing forward consented housing schemes?

Existing powers

Local councils already have powers to compulsorily purchase land for housing and planning purposes. section 17(1) of the Housing Act 1985 enables local housing authorities to “acquire land as a site for the erection of houses”, and to “acquire houses, or buildings which may be made suitable as houses”. These powers can be used to acquire land by agreement or compulsorily. They apply to residential conversions of existing buildings as well as greenfield sites.

In addition, section 226(1)(a) of the Town and Country Planning Act 1990 enables a local planning authority to “acquire compulsorily any land in their area if they think that the acquisition will facilitate the carrying out of development, redevelopment or improvement on or in relation to the land”. This power can be used to promote or improve the economic, social or environmental wellbeing of the area.

Where a local council proposes using these powers compulsorily, it needs the approval of the relevant secretary of state. Normally consent will only be granted where there is a compelling case in the public interest. It is also necessary to demonstrate that the purpose for which the order is being made justifies interfering with the rights of the landowner.

The real incentive for developers to progress schemes may be the threat of losing a site to a rival housebuilder

In theory, either power could be used for the purpose envisaged in Labour’s plans. In that sense, there is nothing new about what is being suggested.

However, as the law stands the compulsory purchase of land can be a lengthy process. The original landowner may oppose the making of the order and this can result in a public inquiry being held. There is also the potential for legal challenge. Both of these can lead to considerable delay.

With this in mind, it is questionable whether the existing compulsory purchase process would be an effective tool in bringing housing development forward faster than it would otherwise.

Labour’s proposal

Labour’s plans do not include detail regarding how the difficulties of the current system would be overcome. However, it is clear that in order to be effective the existing compulsory purchase order (CPO) process would need to streamlined.

There will also need to be clarity regarding the circumstances in which the making of a CPO will be justified. For example, would it be appropriate to use CPO powers where there is a question mark over the financial viability of a particular scheme? While it may be the case that some developers are holding on to sites in order to wait for values to rise and therefore maximise profits, in current market conditions many schemes simply do not make financial sense.

As well as raising the issue of fairness, this also calls into question how the compulsory acquisition is to be funded. Will additional resources be made available to councils for this purpose or will the acquisition be funded by the proposed developer?

It is already the case that once land has been acquired by a council using existing CPO powers it is often passed on to a third party who has agreed to carry out the scheme - for example, derelict housing acquired under section 17 of the Housing Act that is then passed on to a housing association for refurbishment and use as affordable housing.

It is assumed that under the Labour proposals sites will be handed over to another developer who has agreed to build the approved housing. The real incentive for developers to progress schemes may be the threat of losing a site to a rival housebuilder. Of course, in this context the potential for opposed orders and legal challenge
is high.

Clearly, further details are needed before we can properly assess how and whether the proposal would work in practice.

Lee May is an associate at Brachers