Labor intends to tackle the housing crisis by forcing landlords to sell at lower prices

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Labor is drawing up plans that would force landowners to sell land for a fraction of its potential market price in a bid to cut house-building costs in England, according to party officials.

Lisa Nandy, shadow leveling secretary, plans to reform the way land is valued when acquired by councils through ‘compulsory purchase orders’ (CPOs), if Labor wins the next general election.

Labour’s proposal for sweeping land reform would go far beyond the government’s recent moves to allow ministers to force landowners to sell their properties cheaper on limited occasions.

Housing will be one of the big issues in the upcoming election, with Labor leader Sir Keir Starmer vowing to massively ramp up construction to ease the country’s housing crisis, while the Conservatives are more cautious.

At present, many prospective first-time buyers are unable to move up the real estate ladder due to high prices.

CPOs allow public bodies or local authorities to compel property owners to sell if the land is deemed essential for the construction of critical infrastructure or homes.

Under the proposals, a future Labor government would introduce legislation allowing local authorities to buy land at a price that does not reflect the value of potential planning permits.

This would override the 1961 Land Compensation Act, which prevents municipalities from buying land for development at its agricultural value.

Currently, local authorities acquiring sites through CPOs have to factor the “value of hope” into the purchase price. This is value added based on the expectation that the land will get planning permission in the future.

Since then, the gap between the value of farmland and permit fields has widened significantly.

Land worth £22,520 per hectare as farmland can on average be worth £6.2 million per hectare with permit – 275 times as much – according to the Center for Progressive Politics think tanks.

“We want local areas to capture and benefit from a much greater increase than they currently do when development occurs,” said a labor aide.

“We want to tip the balance of power. It appears that the balance is tipped towards . . . landowners, we want to refocus it on communities that want to see more homes built,” the aide added.

Labor argues the plan would bring England more in line with land valuation systems in Germany, France and the Netherlands.

The proposals risk angering some landowners, especially those with fields suitable for development. But Hugh Ellis, policy director at the Town and Country Planning Association, a charity, said Britain’s “new towns” program of the 1940s and 1950s was successful because development companies could buy vast tracts of agricultural land.

He said Labor had a “just right” to look at potential reforms, arguing that property owners had enjoyed “an absolute license to print money”.

“Labour has to strike the right balance with landlords, giving them some kind of uplift, but nowhere near what we’ve seen in the last 15 years.”

In 2018, a government review by Sir Oliver Letwin, a former cabinet minister, stopped short of recommending that the authorities could buy land at his agricultural price.

The government has launched a consultation in 2022 in limiting or abolishing the value of hope. In April of this year, he announced new powers that allow the leveling secretary to limit or suspend hope value compensation payments, on a scheme-by-scheme basis.

This new rule is expected to be introduced through an amendment to the capping and regeneration bill. At the time, the department said the “box-by-box” approach would allow cases to be assessed in relation to the European Convention on Human Rights.

The Department of Leveling, Housing and Communities said hope value payments could often increase costs for councils.

“Our reforms will ensure that the taxpayer gets the best value for money by removing ‘hope value’ where justified and in the public interest,” he said.

“It will ultimately be up to the Secretary of State to decide whether a forced buy order can be approved and whether the removal of the hope value is appropriate.”