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14th September 2018

Land Value Capture – a Current Hot Topic

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Land value capture will be a hot topic in connection with the proposed high level of development in the Oxbridge Corridor, all of which came a step closer with the recent publication of the preferred route for the Expressway. The Centre for Progressive Capitalism published a report on the issue in October 2017 which set out how the rise in land values could potentially support a £14bn investment in infrastructure and affordable housing along the Cambridge – Milton Keynes – Oxford corridor (East West corridor) a proposition predicated on Parliament passing primary legislation to enable local authorities participating in large scale infrastructure projects to receive a greater share of the uplift in land values to fund the project. The report indicated that attempts in the Neighbourhood Planning Act to capture a rise in residential land values will be in sufficient to finance infrastructure and recommended new legislation including amendments to CPO compensation to exclude “hope value”.  A development corporation for the region was also proposed to assemble sites and commission infrastructure.

This week Housing Minister Kit Malthouse gave a strong indication that there is no immediate intention for the government to exclude hope value from CPO compensation, which will no doubt be reassuring for many landowners in the corridor and beyond.

A report has been published this week by the Housing Communities and Local Government Committee of the House of Commons which concludes that communities should share in the increase in land values which results from public policy decisions such as planning permission and infrastructure projects. It took the view that this was both fair and necessary if the government is to provide enough new homes and infrastructure.

Some key findings of the report were:

• The CPO process which is seen as important in delivering schemes, should be simplified.
• There is an urgent need to agree up to date local plans as clarity of the obligations on landowners will
   help to reduce development land values
• CPO compensation should reflect the costs of development and infrastructure as well as capturing a
   proportion of the profit
• Further reform to the viability process will enhance the benefits from s106, which is a useful device and
  should be retained.
• Further consideration should be given to a Local Infrastructure Tariff and a Strategic Infrastructure Tariff
• CIL needs to be reformed
• Consideration should be given to how to capture increases in the value of existing property which results
   from pubic investment in infrastructure.

It seems clear that the government is determined to capture for itself more of the increase in value of land in the future. Past attempts to do this have often been counterproductive and short lived, but we can anticipate that there will be more announcements to come in the foreseeable future which will be important to all concerned with the development of land. It will be worthwhile to keep track of what is proposed and to comment when the opportunity arises.