IS IT REALLY THE HOPE THAT KILLS YOU?

July 11, 2023 by philipbarnesblog 1 Comment

When it comes to ideas to increase housing delivery two theories just never go away. Firstly, that housebuilders hoard land and secondly, that abolishing Hope Value will drive up land supply and deliver more homes and higher levels of infrastructure.

We will leave land hoarding to another day given that the CMA is currently looking at the issue. Suffice to say Barratt does not hoard land and a good proportion of my workload is spent trying to drive out faster delivery from every plot in either our short term or long term landbank.

…….which leads onto the links between land promotion and hope value……..

Landowners are unlikely to enter into a commercial agreement with Barratt which commits them to sell their land to us, after having secured a local plan allocation, if the end-result is that the land can be CPO’d by the state, absent hope value. And not just Barratt. No land promoter is going to persuade a landowner to pay them a fee for securing a plan allocation and a land sale if the end value is agricultural. Abolishing hope value seems likely to trigger a land strike – that’s the lesson of history.

……..but surely it can’t be that simple……….

The time taken up by Select Committees, think tankers and general tweeters on the merits of abolishing hope value points to something much deeper. The theory goes that there are zillions of pounds unjustifiably banked by landowners which could easily be captured for infrastructure if only the state could buy this land absent hope value. In terms of defining the actual amount of this lost value, the recent blogpost from Matthew Spry (1) is instructive. Namely far less than some of the more popular estimates.

………lower land values will be good for housebuilders right……….

If we assume the missing zillions do exist and could be released to provide extra goodies for local communities and customers, nobody would be happier than Barratt. Lower land values for planning consents which deliver more public amenities is perhaps our second favourite thing in the whole world. Unfortunately, our first favourite is a secure and predictable supply of consented housing land which helps Barratt grow the number of homes of homes we build. We see abolition of hope value as a clear threat to that.

.……..abolishing hope value will increase land supply and housing delivery…….yes??………

Unfortunately not. Most landowners will stop releasing their land and therefore CPO’s will be needed to provide sufficient land to develop 300,000 homes per year. Having been a witness in several CPO inquiries they are incredibly resource intensive, taking out a team of Officers for weeks at a time. And quite rightly so – when the state proposes seizing someone’s most important asset, against their will, it is not something to be done lightly. The implications are huge and the opposition to each CPO will be strong.

.……..So, if land supply is dependent on CPO. How will this work??……..

LPA planning teams, often lacking the resources to process simple planning tasks within months, will be required to run multitudes of hostile CPO inquiries at the same time. Even if some massive increase in resources does appear, the next obstacle is the timing of the LA land acquisition in our plan-led system.

……..LAs would need to decide which land to buy, and when……..

If the acquisition is made early in the process, it may be easier to secure with landowner agreement at a price closer to agricultural value. However, the LA may well waste its money because the site may never achieve the allocation to enable it to accommodate new homes. This is because in a plan-led system the process of promoting a site, and achieving consent is a quasi-technical, highly competitive process with PINS as the ultimate arbiter.

The prospects of success are low. All housebuilders and land promoters know this and accept the risks and rewards. Are LAs willing to invest into those risks at such an early stage given that the plan-led system cannot be rigged to ensure only LA owned sites, bought at agricultural value, always secure the allocations? It’s a one-in-ten shot, with PINS as the arbiter. The Matthew Spry blogpost is again helpful on the huge financial implications for LAs taking on these risks.

……..but LPAs could simply invest in sites which are already allocated to minimise these planning risks……..

Abolitionists say that the reality of abolishing hope value would be a mixed supply of allocated land – one or two sites bought by CPO absent hope value, and others sold on the open market with (or without) the benefit of allocation and/or planning consent. Landowners would supposedly then still release land and embrace the planning risk.

In this theoretical world landowners would then face two battles. Firstly, to achieve one of the precious local plan allocations, and secondly to avoid their allocation being one of the sites to be purchased by the LA absent hope value. Those two risks will deter most landowners – why would anyone promote land if the huge sunk costs could be lost via a CPO.

……….what about the fairness of this ‘two price’ market……...

In this theoretical mixed supply scenario, two adjacent sites, or perhaps even two parts of the same allocated site, will secure vastly different land receipts for the same housing use. The first landowner would receive diddly squat because the state has purchased it at agricultural value, (assuming the CPO is successful) whilst the second would secure the full open market value.

The unfairness of such a two-price market, whereby the state can seize assets at below market value, underpinned the decision in the seminal Myers vs Milton Keynes Development Corporation legal case in 1974. A decision which underpins the current legal position as much as the oft-quoted 1961 Land Betterment Act.

It will be a high bar for LAs to prove that the public interest benefits of acquiring a particular site outweigh the human rights issues arising from paying a landowner less than market value for their allocated site, in stark contrast to neighbours. Especially when the landowner actually wants the land to be used for the housing use which is the subject of the CPO.

………..so how do we create a system whereby the right amount of land value is captured for the community from all allocated housing sites……..

On this, I will simply defer to the late great Simon Ashworth as quoted in the 2018 House of Commons Select Committee Report on Land Value Capture:

“The effective use of existing planning policies – a well-defined local plan with clear objectives and requirements, and a more strategic use of CIL – could be an equally effective way to drive down land value to such an extent that there is precious little hope value left”

In otherwords, as with most things land and planning, robust up-to-date local plans is the fundamental requirement for success. Maybe best to fix that first before triggering the biggest risk to housing land supply in decades?

(1) https://lichfields.uk/blog/2023/june/8/abandon-all-hope-ye-who-enter-here/