Public bodies want to deliver development and regeneration, and developers say they will build if they have land – so why aren’t we seeing a raft of compulsory purchase orders (CPOs) being promoted to bring forward much needed housing and employment schemes?
We wonder if authorities and developers are waiting for a “perfect” CPO and compensation system to be in place before pressing the CPO button on long-standing schemes. If so, how many boats will be missed? And what impacts will this have on the construction industry, which is already going through a torrid time?
CPO powers and the CPO process are tried and tested, and the vast majority of CPOs are successful – but the government, through the Levelling Up and Regeneration Bill and associated consultation on compensation is seeking to tinker with the CPO regime to try to make the powers more attractive to the industry. So are the reforms worth it, and will they help remove uncertainty and delay for those seeking to price and deliver schemes?
Process
A key proposal in the Bill is that CPOs should be able to last longer than the current maximum of 3 years. Whilst helpful to promoters, estimating scheme build costs will potentially be harder as one could have later phases of schemes not being on site for several years beyond that time horizon.
One of the Bill’s more interesting proposals is the conditional confirmation of CPOs – so if at inquiry all elements of a CPO case cannot be demonstrated, confirmation might occur upon future satisfaction of certain conditions.
If a condition is unsatisfied by the due date, the CPO will not be confirmed. Where conditions are imposed, the Bill says affected parties will have an opportunity to make representations. This could be complicated because policy, scheme viability (especially build costs), or even the scheme itself may have changed. The Bill may need further thought to ensure a robust process. The potential for confirmation of CPOs to be kicked down the road, introducing uncertainty on timescales, will again make the job of estimating build costs more difficult.
The implementation of these reforms may well see hard-fought inquiries and cases in the Courts – and so further delay and uncertainty, at least initially, before we can judge whether they are helpful.
Compensation
In terms of compensation, the most far-reaching consultation proposal is that landowners’ compensation may not reflect the land’s “development value” and be capped at or above existing use value, so that the remaining value is “captured” to fund infrastructure or other public benefits.
It sounds laudable but it is a fundamental departure from the long-established principle of “equivalence” (compensation representing the land’s market value) and is seen as an unfair infringement of a landowner’s basic rights. Why should an owner’s compensation be capped simply because a line has been marked on a plan to include their land in a CPO?
The government proposes to allow the secretary of state to issue a direction, where land is to be included in a CPO, to limit compensation payable at or above existing use value where it is shown to be in the wider public interest. The case would be based on the need for compensation to be “restricted” to make a scheme viable and/or to enable it to deliver infrastructure or other public benefits.
Leaving aside the issue of the removal of owners’ rights, there are practical issues. This process is likely to be complex and lengthy and would pre-date the making of a CPO, with owners having the right to make representations against a direction. There will potentially be significant delays to a CPO being made until this process is exhausted. Authorities will need to submit detailed viability information (including development, infrastructure and build costs) for scrutiny and one can assume there will be protracted debates and legal challenges, so delays could multiply. This will add a potentially lengthy process to the pre-CPO stage, which again will make it difficult for robust development costs figures to be advanced which will still stand the test of time when the CPO public inquiry happens – which could be several months or even years after the Secretary of State issues a direction on the basis of a set of figures.
Whilst the Bill’s CPO process changes will probably become law, the compensation consultation changes will struggle to clear Parliament. Even if they do, secondary legislation will be needed, and we are at risk of authorities holding back on CPOs until then. But if they do, what is certain is that there will be a greater scrutiny on build costs and a need to “future proof” development and build costs figures to an extent that is not required at present.
Ultimately, will all this really assist? We are not so sure.
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