Jeremy's Blog 10th June 2022: Does Property Matter to Government
This article by Jeremy Moody first appeared in the CAAV e-Briefing of 9th June 2022
The principle of equivalence has long lain at the heart of compulsory purchase compensation. Its inbuilt downward pressure encouraging resistance and so delay and extra cost for projects, George Osborne, then Chancellor of the Exchequer, put it to the Royal Economics Society only seven years ago that
“We should change our outdated compulsory purchase regime. Both the LSE Growth Commission and Chambers of Commerce have had the bright idea that, in some cases, if you pay people a little more you’d get planning a little quicker and the whole process could cost you less.”
However, Monday’s consultation on compulsory purchase compensation in England and Wales now proposes the opposite, bearing down on hope value. The Levelling Up and Regeneration Bill would be amended to allow “public sector entities” to ask for authority to cap compensation at existing use value or a value based on it. Further, the paper asks for views on going further and capping or removing hope value either generally or in relation to specific types of schemes. It argues that a “fair” price would aid the viability of the scheme and its benefits; that is Land Value Capture.
This is to be seen together with other measures in the Bill: the Infrastructure Levy, changes to local plans, the creation of locally-led development corporations and so forth. The consultation’s argument starts from the regeneration of town centres where England’s Use Classes Order and permitted development rights already give much freedom. Aside from distractions like rental auctions, street votes and the title of mayors, the real use of this suppression of value could be to drive new settlements, with land bought at prices based on existing use value, a council-led development corporation master-planning the infrastructure and letting building contracts.
As so often with the dreary cycle of development taxation, we have been here before. A similar approach in the 1947 legislation added complexity for developers fearing compulsory purchase which then became politically unattractive in the 1950s. It was seen to underpay, so creating resistance to the point where the present rule was introduced in 1959.
The question is whether policy makers, almost never on the receiving end of compulsory purchase, either understand or care about property rights with their powerful role as a factor in the economy, their assurance to businesses and families and an enabler of investment.
This proposal is not alone. Other Government Bills in Parliament would:
- further weaken landowners’ rights and degrade value under the Electronic Communications Code, even though the 2017 Code have created resistance, cost and delay and a hundred-fold more litigation
- repeal no fault notices for shortholds, the measure that reversed the let sector’s death spiral under the Rent Act 1967, attracting investment for forty years. This sector has already lost 250,000 dwellings (6 per cent) since 2019 with increasing fiscal and legislative pressure, removing opportunity, often scarce in rural areas, for those excluded from buying, driving rents up.
Where policies make property a plaything, distort markets and focus on symptoms, not causes, that weakens the economy and stores problems for the future.