Labour planning to change how land is valued to encourage housebuilding

Labour is reportedly planning to give councils in England the right to buy land more cheaply if it wins the next general election - as part of efforts to tackle a shortage of new homes.

According to the Financial Times, which broke the story, the party would change the way land is valued under the “compulsory purchase order” process so local authorities looking to find sites for housing developments don’t pay a premium.

What are compulsory purchase orders?

These orders allow councils and other authorities like National Highways or development corporations to buy land or property they need for projects that benefit the “greater public good” (such as a housing estate).

The process usually takes time, the government has to formally approve each order and any people living on land earmarked for development have to be compensated.

Crucially, when councils make an offer to buy the land they need, they must factor in what’s known as the “hope value”. This is the amount it could be worth if planning permission was granted for development. The hope value is often significantly higher: in 2018, the Centre for Progressive Policy worked out if farmland had permission to build on it, the price jumped from around £22,000 a hectare to more than £6 million a hectare.

That makes it much harder for cash-strapped councils to go through with a purchase - and keeps the supply of housing smaller than it would otherwise be.

What is Labour’s plan?

It’s understood Shadow Levelling Up Secretary Lisa Nandy wants to scrap the hope value rule - so local authorities can buy the land they need for housing at a much lower price.

Labour insists this wouldn’t mean that councils were paying below market value for land - and says the change would bring England into line with arrangements in France, Germany and the Netherlands.

What is the government doing in the meantime?

Housing reforms currently going through Parliament would see hope value removed only when it was “justified in and in the public interest”. Ministers would decide when it could still be imposed.

The Department for Levelling Up, Housing and Communities said: “We want councils to be able to unlock more land for affordable housing, which is why we are reforming compensation for compulsory purchase orders”.

“It will ultimately be for the Secretary of State to decide whether a compulsory purchase order can be approved and if the removal of hope value is appropriate”.

Housing a key battleground

The race to build new homes as supply fails to keep up with demand is likely to be a major focus of the next general election campaign,

Soon after taking office, Rishi Sunak abandoned the commitment made by one of his predecessors Boris Johnson to build 300,000 homes a year in England - following opposition from some Conservative MPs who didn’t want large developments in their constituencies.

Earlier this month, Housing Secretary Michael Gove admitted there was a “problem” in housing availability and said it was “increasingly difficult to get on the property ladder”.

Labour leader Sir Keir Starmer has set out plans to allow building on green belt land in England “in some circumstances” but is facing his own internal battle on the issue. Analysis by NationalWorld found that more than a fifth of Labour’s MPs in England - and eight members of Labour’s frontbench - have previously spoken out against green belt building.