Nothing Was Delivered

“Nothing was delivered/And I tell this truth to you/Not out of spite or anger/But simply because it’s true” (Bob Dylan)

It was the first meeting on 5 February of the prime minister’s housing implementation taskforce. The subsequent press statement summarises the event as follows:
Today the Prime Minister chaired the first meeting of the Housing Implementation Taskforce at Downing Street.

She stressed the integral role all Government departments have in helping to fix the broken housing market and deliver 300,000 additional homes by the mid-2020s.

The taskforce discussed the steps Government has already taken, including further investment at the Budget, planning reform, releasing land faster, the Housing White Paper and building more affordable housing. They emphasised the key role of Homes England in driving forward change, and also focused on the supply of new housing, public sector land sales, land banking, house-building skills and building the infrastructure needed for new housing developments.

The Prime Minister reiterated that a step change was needed right across Government and that all departments needed to think creatively about how they can contribute to building the homes the country needs.
That “300,000 additional homes by the mid-2020s” reference is an interesting one, reflecting the Government’s previous 11 January 2018 announcement of the creation of Homes England:
Homes England will play a major role in fixing the housing market by helping to deliver an average of 300,000 homes a year by the mid-2020s.
This is surely a tactical step back from the Conservative party’s 2017 manifesto commitment, with no longer any pre-2022 election target:
We will meet our 2015 commitment to deliver a million homes by the end of 2020 and we will deliver half a million more by the end of 2022.”
A significant proportion of the country’s homes will need to come forward in London – the Mayor of London’s draft London Plan sets a target of around 65,000 homes a year, a significant increase from the previous plan figure of 42,000. 
These figures are only going to be achieved with a large degree of consensus between central government, the Mayor, boroughs and local communities. If I were prime minister (perish the thought) I would be worrying that in many areas, but particularly in London, there is increasing “spite or anger” (in the words of Mr Dylan). Inevitably, in any year with borough elections, planning becomes politicised but this year, with the repercussions of the Grenfell tragedy, the predictions of Conservative council losses and the internal battles within the Labour party, this is particularly so. EG has tracked the number of refusals in London up to the end of 2017. It makes for uncomfortable reading and the position will only be worsening. 

Against that background, is there a crisp appeals process? Not at all. The Planning Inspectorate’s performance statistics are still poor:

Anecdotally, many developers and authorities are keeping politically controversial decisions away from committees until the other side of the 3 May local government elections, even though the formal purdah rules, summarised in a useful Local Government Association guide, largely allow for statutory processes to carry on.
The politically charged atmosphere in many boroughs isn’t just leading to refusals of permission against officers’ recommendations – leading in turn to officers having to spend time defending appeals, with inevitable repercussions for capacity to cope with other applications in the system – but it’s impeding the work of boroughs that seek to achieve housing development, particularly in relation to estate regeneration schemes, without which those London numbers are not going to be met. 
Progress on the Haringey Development Vehicle initiative, brought forward by Haringey Council with private sector joint venture partner Lendlease, has now been halted by leader councillor Claire Kober, with no further decisions to be taken before purdah commences on 26 March until after the 3 May local election. Given that, following sustained pressure over the project, she announced on 30 January that she will not be standing for re-election, its long term future may be in doubt. This was a strategy to bring about widespread development on sites in the council’s ownership, including the proposed delivery of up to 6,400 homes. The HDV would in due course formulate development proposals for sites and make planning applications, applications which would be assessed as against planning policy, with the power for the Mayor to intervene in the usual way, but plainly in Haringey even the nature of the vehicle to be used to bring about development, presumably because of the role to be played in it by a private sector developer, was seen by objectors as unacceptable. 
There is room for debate in a democracy as to the form that regeneration should take and the extent and types of affordable housing to be provided but if the HDV is not to happen, what will? In current political and financial reality, my fear is that an opportunity to increase housing at scale, including affordable housing, will be lost. It is vital that affordable housing, with tenures to meet needs, is provided. Will the collapse of the HDV render this more or less likely? What’s the alternative? What’s the objectors’ plan? To continue this position until a 2022 general election? 
Whilst the politics played out, unpleasantly according to Councillor Kober’s account, Ouseley J was writing his judgment in Peters v London Borough of Haringey. This was a crowdfunded judicial review that had been brought on behalf of campaign group Stop HDV, seeking to establish that the council had acted outside its powers in proceeding with the project. The hearing had taken place over two days in October 2017 but Ouseley J’s judgment, over 50 pages long, was only handed down on 8 February 2018. 
The main ground of challenge was a legalistic one if ever one there was: that the council had acted outside its powers in establishing with Lendlease a limited liability partnership as the vehicle to take forward its strategic aims, on the basis that section 4(2) of the Localism Act 2011 provides that where “a local authority does things for a commercial purpose, the authority must do them through a company“. The judge rejected the argument:
To my mind, there is no doubt but that the Council’s purpose in entering into the arrangements setting up the HDV and governing its operation, including the relationship between the two partners, cannot be characterised as “a commercial purpose” within the scope of the Localism Act. Even more clearly is its dominant purpose not commercial. Any commercial component is merely incidental or ancillary, and not a separate purpose.”

“…the phrases to which Mr Wolfe took me do not show a separate commercial purpose, whether minor or not. It is important to examine why this is all being done. The purpose behind the Council’s entering into the HDV and associated arrangements is not that of a property investor, simply seeking to make a profit or to achieve a return on development or improved rentals. The purpose of the Council is to use and develop its own land to its best advantage so that it can achieve the housing, employment and growth or regeneration objectives that it has laid down. In order to achieve as much as it can, it has to achieve the best consideration on any disposal of its land; and it must be in other respects financially prudent, to produce returns in various ways which can be used to further its policy objectives. Achieving the return is neither the activity nor its purpose of itself.”

“The acquisition of other land in the context of regenerating a large estate is a commonplace, and, backed by compulsory purchase powers, it demonstrates not one whit that a separate activity of property development is being undertaken.”
In any event, the judge considered that the challenge in relation to this ground and others (lack of consultation, Equality Act) had been brought out of time. I understand that the claimant is likely to seek permission to appeal. 
In another part of London, progress is still slow on another regeneration project that has been to the High Court and back, the Aylesbury Estate. I covered in my blog post Regeneration X: Failed CPOs the decision of the Secretary of State to decline to confirm Southwark Council’s CPO based on his concern as to the effects of acquisition on leaseholders, a decision which was subsequently quashed by consent following a challenge brought by the council. A second inquiry that has been taking place into the order was adjourned on 31 January 2018 to resume for a further two weeks on 17 April. Judging from a ruling by the inspector prohibiting further filming at the inquiry it has been a lively event so far. 

According to the council’s statement of case:
The acquisition of the Order Land will enable demolition of the existing buildings in order to replace the 566 existing units of social and privately owned housing with a mixed tenure development comprising 830 homes. Of these, 304 will be social rent, 102 will be intermediate (affordable homes available as shared ownership or shared equity) and 424 will be private (of which 48 will be for open market rent and the remainder for sale). Included in the social rent homes are 50 extra care units and 7 units for people with learning difficulties.”
Inevitably, whatever the gains in housing numbers to be achieved (and indeed the affordable housing of all tenures to be provided), there will be legitimately held concerns on the part of residents directly affected. The Mayor announced on 2 February 2018 “mandatory ballots of residents for schemes where any demolition is planned as a strict condition of his funding“. 
Meanwhile, elsewhere in Southwark, Delancey has continued to face resistance in relation to its proposed redevelopment of the Elephant and Castle centre. At a committee meeting on 16 January, members overturned an officer’s recommendation to grant planning permission. A final decision has now been deferred, following a revised offer as to affordable housing and other commitments reportedly made by the developer. 
Delivery of the right schemes, in a way which maximises the potential for affordable housing and the wide range of other requirements set out in the draft London Plan will not be easy. How will land owners and developers respond? Will the Mayor continue to intervene to direct refusal where the affordable housing proportion offered is considered to be less than the maximum reasonably achievable? Will he use his call-in powers where boroughs unreasonably withhold permission for schemes which would deliver homes at scale? The Government had proposed back in 2015 reducing the threshold above which the Mayor could intervene on planning applications from 150 to 50 homes but unless the Mayor is seen as using his existing powers regularly and proactively to increase housing delivery, this may remain on the Government’s to-do list. 
The housing numbers that the Government is targeting will not be achieved without an active and engaged private sector. What if land owners choose not to release their land? There is a remarkable degree of consensus between the Conservative and Labour parties as to the desirability of using compulsory purchase powers. I covered the Conservative party’s manifesto thinking in my blog post Money For Nothing? CPO Compensation Reform, Land Value Capture (20 May 2017), in which I tried to set out some of the complexities arising from any proposal to change CPO compensation principles so as to strip out planning “hope” value (as opposed to just being smarter about using CPO powers in a way that hope values haven’t arisen in the first place). There was much publicity this month arising from an announcement from Labour shadow minister John Healey reported in the Guardian on 1 February that “Labour is considering forcing landowners to give up sites for a fraction of their current price in an effort to slash the cost of council house building“. 
Landowners currently sell at a price that factors in the dramatic increase in value when planning consent is granted. It means a hectare of agricultural land worth around £20,000 can sell for closer to £2m if it is zoned for housing.

Labour believes this is slowing down housebuilding by dramatically increasing costs. It is planning a new English Sovereign Land Trust with powers to buy sites at closer to the lower price. 

This would be enabled by a change in the 1961 Land Compensation Act so the state could compulsorily purchase land at a price that excluded the potential for future planning consent.”
I haven’t seen any more detailed analysis of the proposal or indeed any fleshing out of the idea of an English Sovereign Land Trust. Personally I would prefer to see Homes England grasp the nettle, with their existing wide compulsory purchase powers, to acquire sites at a scale which would be difficult to achieve without compulsory purchase, thereby minimising “no scheme world” values. Labour’s English Sovereign Land Trust concept sounds very rural in concept and not a substitute for facing up to difficult challenges about maximising use in cities of public sector land, about densifying suburbs and about effective approaches to estate renewal. 
And given the supposed cross-party support for increasing housing delivery, wouldn’t it be good to try to depoliticise the process where we can, rather than demonise the participants whether from public or private sector? I’ve previously blogged about the multiplicity of reviews being undertaken, to which list can now be added the CLG Commons Select Committee’s land value capture inquiry, for which the deadline for evidence is 2 March 2018). What scope can we find for consensus, about priorities, about the respective roles of the public and private sector, about funding of social housing and about the appropriate use of compulsory purchase?
Simon Ricketts, 10 February 2018
Personal views, et cetera


Money For Nothing? CPO Compensation Reform, Land Value Capture

To what extent might the state choose to tax land owners, through reducing their compensation entitlement, in order to facilitate the provision of housing or infrastructure, rather than subsidise that provision through more general tax raising? How can the state capture land value gains created by its own infrastructure provision, or due to its own strategic planning for development?
These questions are central to a number of current areas of public policy thinking, including:
– Using compulsory purchase 
– Land auctions and land value capture charges
– Benchmark land values in viability appraisal
– CIL reform
There are some confluences arising in this area between current Conservative party thinking, other political parties, Transport for London and Shelter to name but a few. I’m not sure that land owner interests have yet joined all the dots. Developers may wish to partner more closely and regularly with local authorities with compulsory purchase powers, but in other situations should also be aware of the risks ahead for their businesses if additional costs are not sufficiently predictable as to come off the land price or if they cause land owners simply to hold rather than sell. 
Using compulsory purchase

Compulsory purchase is already a practical mechanism for securing land where there is a compelling case in the public interest for interfering with private property rights. Of course it isn’t easy, and will never be. The power is draconian. The necessary procedural safeguards to protect against its abuse make for a slow, procedurally technical process and for uncertain outcomes.

Another disincentive for local authorities can be the significant compensation costs payable, given the fundamental principle that the land owner is entitled to what the value of his interest would have been were it not for the compulsory acquisition (the ‘equivalence’ principle). Even where compensation liability is being underwritten by a developer partner, the extent of compensation is:
– likely to affect whether the project is viable after all; and
– not ascertainable until all parties are too far in to back out due to the leisurely pace at which a compensation figure is determined (both pre- and post-reference to the Lands Tribunal, aka Lands Chamber of the Upper Tribunal). 
The Conservative manifesto, published on 17 May 2017, refers to compulsory purchase in this one paragraph:
“We will enter into new Council Housing Deals with ambitious, pro-development, local authorities to help them build more social housing. We will work with them to improve their capability and capacity to develop more good homes, as well as providing them with significant low-cost capital funding. In doing so, we will build new fix-term social houses, which will be sold privately after ten to fifteen years with an automatic Right to Buy for tenants, the proceeds of which will be recycled into further homes. We will reform Compulsory Purchase Orders to make them easier and less expensive for councils to use and to make it easier to determine the true market value of sites”

I am guessing that what is planned goes further than making the current system work better. Changes are being considered which would enable in some circumstances greater use of compulsory purchase and, in some circumstances, acquisition at lower values than the equivalence principle would suggest. 
The February 2017 Housing White Paper says this:
“2.43 Compulsory purchase law gives local authorities extensive powers to assemble land for development. Through the Housing and Planning Act 2016 and the Neighbourhood Planning Bill currently in Parliament we are reforming compulsory purchase to make the process clearer, fairer, and faster, while retaining proper protections for landowners. Local planning authorities should now think about how they can use these powers to promote development, which is particularly important in areas of high housing need. 

2.44 We propose to encourage more active use of compulsory purchase powers to promote development on stalled sites for housing. The Government will prepare new guidance to local planning authorities following separate consultation, encouraging the use of their compulsory purchase powers to support the build out of stalled sites. We will investigate whether auctions, following possession of the land, are sufficient to establish an unambiguous value for the purposes of compensation payable to the claimant, where the local authority has used their compulsory purchase powers to acquire the land.

2.45 [ ]

2.46 We will keep compulsory purchase under review and welcome any representations for how it can be reformed further to support development.”
Note the references to encouraging the use of compulsory purchase where development has stalled, and investigating the use of auctions to establish land value (more on that later in this blog post).
Revealingly, in the week before the publication of the manifesto there was a press release with this passage in its “notes to editors”:
“To further incentivise councils to build, the Conservatives also intend to reform compulsory purchase rules to allow councils to buy brownfield land and pocket sites more cheaply. At the moment, councils must purchase land at “market value”, which includes the price with planning permission, irrespective of whether it has it or not. As a result, there has been a more than 100% increase in the price of land relative to GDP over the last 20 years and the price of land for housing has diverged considerably from agricultural land in the last fifty years. Between 1959 and 2017, agricultural land has doubled in value in real terms from £4,300 per acre to £8,900 per acre, while land for planning permission has increased by 1,200%, from £107,000 to just over £1,450,000. Local authorities therefore very rarely use their CPO powers for social housing, leaving derelict buildings in town centres, unused pocket sites and industrial sites remain undeveloped.
I’m guessing at the following policy strands for a future Conservative government from these various statements:
1. Further encouragement for use of CPO powers in the right circumstances, including particular encouragement where a “Council Housing Deal” is in place (guaranteeing social housing with a fixed-term right to buy for tenants) and possibly where private sector development is shown to have stalled (link this and the “delivery” elements of the Housing White Paper and this could be quite a stick to wield).
2. Further process reform likely.
3. Reform likely of the process for determining the compensation price to be paid, so that (1) figures are known earlier on, (2) the land auctions model is followed (see later in this blog post) to determine values in appropriate circumstances and (if those ‘notes to editors’ are to believed) (3) in some circumstances authorities will be able to acquire land for less than it is worth (possibly ruling out hope value unless planning permission or a certificate of appropriate alternative development under section 17 of the Land Compensation Act 1961, has actually been obtained). 
The last point (still speculation) has caused consternation and excitement in equal measure. The principle of equivalence is at stake, but equally this opens up the prospect of securing land for development at an undervalue so as to achieve affordable housing at no cost to the state. Money for nothing (unless you are the land owner). Shelter for example have been lobbying for a similar approach. Their May 2017 paper Financing the infrastructure and new homes of the future: the case for enabling acquiring authorities to purchase land for strategic development under a special CPO compensation code May 2017 lobbies for Government to:

enable acquiring authorities to purchase land for strategic development under a special CPO compensation code. This would involve three changes:

1)  An amendment to the National Planning Policy Framework to allow planning authorities to designate land for strategic development; 

2)  An amendment to Section 14 of the 1961 Land Compensation Act to disregard prospective planning permissions on land designated for strategic development; 

3)  An amendment to Section 17 of the 1961 Land Compensation Act to restrict the use of certificates of alternative development on land designated for strategic development.”

Shelter’s delight at the references in the Conservatives’ recent policy announcements is plain to see from their subsequent 16 May 2017 blog post Compulsory purchase and council homes – a new direction for housing policy?
Do the Conservatives really intend such a radical market intervention, or do they misunderstand how the compensation system currently works? The reference in the press release’s “notes to editors” that “councils must purchase land at “market value”, which includes the price with planning permission, irrespective of whether it has it or not” is of course wrong. The prospect of planning permission for development in the “no scheme world” is taken into account in arriving at a valuation but the existence of a planning permission is never assumed. 

However logically necessary the concept is, the “no scheme world” (or “Pointe Gourde”) rule been much criticised for being difficult to apply in practice. Its complexities were most recently explored by the Supreme Court in Homes & Communities Agency v JS Bloor (Wilmslow) Ltd  (22 February 2017), where Lord Carnwath said this:
The rule has given rise to substantial controversy and difficulty in practice. In Waters v Welsh Development Agency [2004] 1 WLR 1304; [2004] UKHL 19, para 2 (“Waters”), Lord Nicholls of Birkenhead spoke of the law as “fraught with complexity and obscurity”. In a report in 2003 the Law Commission conducted a detailed review of the history of the rule and the relevant jurisprudence, and made recommendations for the replacement of the existing rules by a comprehensive statutory code…”

Lord Carnwath had himself of course chaired that review. Too late for the litigants in Bloor, now finally, by virtue of section 32 of the Neighbourhood Planning Act 2017  (which introduces new sections 6A to E into the Land Compensation Act 1961) we have a codified version of the “no scheme world” rule. (The compulsory purchase provisions within the 2017 Act are well summarised by David Elvin QC in a paper  to the 2017 PEBA conference). 

New section 6E has refined the rule so that it is now more difficult for claimants to rely on increases in value of their land created by the transport project for which the land has been acquired, where regeneration or redevelopment was part of the justification for the transport project. 
The big question is whether a more radical manipulation of the “no scheme world” rule might be possible, even if it parted from the principle of equivalence. After all, if land for development could be secured at little more than agricultural value…?
It would be mightily difficult, indeed controversial to the extent of potentially being counter-productive, if land is to be acquired without prolonged legal wrangling. If in the real world your land has hope value for another form of development, why should that be ignored? However, in fact it’s not legally impossible.
Article 1 of the protocol to the European Convention on Human Rights states as follows:
Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law. 

The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”

(Incidentally, the Conservative manifesto confirms: “We will not repeal or replace the Human Rights Act while the process of Brexit is underway but we will consider our human rights legal framework when the process of leaving the EU concludes. We will remain signatories to the European Convention on Human Rights for the duration of the next parliament.“)
The European Court of Human Rights interprets Article 1 of the protocol so as to require compensation to be paid in relation to the confiscation of property. In Lithgow v UK  (European Court of Human Rights, 8 July 1986), a case arising from Labour’s nationalisation of various industries under the Aircraft and Shipbuilding Industries Act 1977, the court said:
“The Court further accepts the Commission’s conclusion as to the standard of compensation: the taking of property without payment of an amount reasonably related to its value would normally constitute a disproportionate interference which could not be considered justifiable under Article 1 (P1-1). Article 1 (P1-1) does not, however, guarantee a right to full compensation in all circumstances, since legitimate objectives of “public interest”, such as pursued in measures of economic reform or measures designed to achieve greater social justice, may call for less than reimbursement of the full market value”.

Whilst a distinction was drawn in the case between state nationalisation of industries and the compulsory purchase of property, the same basic principles apply. It is clear from this and other cases that individual states are given a margin of appreciation to determine what is in the public interest. For example:
Sporrong and Lönnroth v. Sweden  (22 September 1982) (a case about longterm blight caused by ‘zonal expropriation permits’)
 “…the Court must determine whether a fair balance was struck between the demands of the general interests of the community and the requirements of the protection of the individual’s fundamental rights…
James v UK  (21 February 1986) (a challenge brought by the trustees of the estate of the Duke of Westminster to leasehold enfranchisement under Leasehold Reform Act 1967):
“Because of their direct knowledge of their society and its needs, the national authorities are in principle better placed than the international judge to appreciate what is “in the public interest”. Under the system of protection established by the Convention, it is thus for the national authorities to make the initial assessment both of the existence of a problem of public concern warranting measures of deprivation of property and of the remedial action to be taken… Here as in other fields to which the safeguards of the Convention extend, the national authorities accordingly enjoy a certain margin of appreciation.” The Court went on to find that the aim of the Leasehold Reform Act 1967, namely greater social justice in the sphere of housing, was a legitimate aim in the public interest

Similarly, in theory a mechanism might be arrived at which in some way disentitled land owners in some circumstances from achieving a full market value for their land. But the circumstances would need to be carefully circumscribed and the reaction of most land owners would be to fight rather than one of flight. 
It is not as if compulsory purchase compensation is presently particularly generous, even with the additional loss payments (capped, even for owner-occupiers, at the lesser of 10% of the compensation payable and £100,000) that were introduced by the Planning and Compulsory Purchase Act 2004 specifically to sweeten the pill for land owners and make compulsory purchase less contentious! Do we really want more uncertain situations such has arisen at the Aylesbury Estate, with the Secretary of State rejecting  a CPO made by the London Borough of Southwark, on the basis of the prejudice that would be caused to leaseholders by the inadequate level of compensation payable to them, and now reportedly  having consented to judgment following a challenge by the council, such that all concerned now face a re-opened inquiry?
Furthermore, if these amended compensation principles are only to apply to, for example, Council Housing Deals, how will dispossessed owners be able to recover their property, or further compensation, if the land ends up not being used for the restricted purposes for which the land was taken?
Lastly, that manifesto reference to making it “easier to determine the true market value of sites”. Does this suggest a simplification of compensation principles? Or an overhaul of the timescales for determining compensation liability? Transport for London have recently suggested (in the paper referred to in the next section of this blog post) that the Government might make “the process of acquiring land through compulsory acquisition more transparent by:

* Introducing an independent valuation panel to determine the market value of the land based on the ‘no scheme’ principle set out in the Neighbourhood Planning Bill 2016 

* Establishing (early in the land acquisition process) an objective and transparent evidence base on alternative development potential in the absence of the scheme, for such a panel to determine ‘no scheme’ market values, for instance through the use of a modified section 17 certificate”.
Land auctions, land value capture charges

The passage quoted earlier from the Housing White Paper refers to “auctions”. Academic Tim Leunig has been promoting  the idea of “community land auctions” for a long time and indeed the idea was toyed with in the early years of the coalition government, whilst to a number of us it seemed naive in its assumption as to how planning actually works:
“The council first asks all landowners to name the price at which they are willing to sell their land. By naming a price, the landowner gives the council the right to buy the land for 18 months at that price. The council then writes a development plan. As now, they will take into account the suitability of the land offered for development, but will also consider the price of the land, and the likely financial return to the council.”
Transport for London has more recently been promoting a more sophisticated “development rights auction model” as a method of capturing land value increases created by transport infrastructure improvements. Their 20 February 2017 land value capture report , summarises it as follows:
“For zones with high development potential (particularly for housing) with multiple landowners, the Government, TfL and the GLA should consider the development rights auction model (DRAM), a new land value capture mechanism. 

The key features of the development rights auction model are: 

* The integrated planning and consenting of land use and density in a defined zone around a major new transport facility, in parallel with the planning of the transport scheme 
* The introduction of a periodic development rights auction, in which development rights over land put forward (voluntarily) by landowners are auctioned in assembled packages to a competitive field of developers. Gains above a reserve price are shared between the participating landowners and the planning/auctioning authority. No development taxes (such as CILs or s106 payments) are payable under this scheme. All non-operational but developable public sector-owned land within the zone is entered into the auction as part of a standard public sector land pooling arrangement 

* The introduction of a high zonal CIL for those landowners who wish to self- develop rather than participate in the auction 

* The use of reformed compulsory purchase order (CPO) powers (following successful passage of the Neighbourhood Planning Bill 2016) to deal with holdout problems that threaten to stall development, together with further consideration of other options as discussed in the report”.
The Government’s 8 March 2017 budget announcements included a memorandum of understanding  entered into with the GLA, that says this:
“At Budget 2016, the government invited Transport for London (TfL) to bring forward proposals for financing infrastructure projects from land value uplift. 

The government has agreed to establish a joint taskforce bringing together the GLA, TfL, London Councils, HM Treasury, Department for Transport (DfT) and Department for Communities and Local Government (DCLG) to explore the options for piloting a Development Rights Auction Model (DRAM) on a major infrastructure project in London.

Should a pilot of DRAM be agreed, it will be jointly evaluated by London and the government to review its effectiveness and determine whether a similar model could be applied to other infrastructure projects.”

I can’t presently relate the DRAM initiative to the reference in the Housing White Paper (quoted above) to establishing land value via auctions in CPO situations, following possession. What on earth is that a reference to?
TfL’s February 2017 paper has various other more radical policy suggestions to capture infrastructure-related land value increases, including changes to SDLT, to retention of business rates and a new “land value capture charge” This would “capture a proportion of the premium paid to landowners by new purchasers or tenants of residential property for access to new transport facilities“. (Shall we call a tax a tax though, folks?). 
There is also a current RTPI research project The Use of Alternative Land Value Capture Mechanisms to Deliver Housing in England and Wales.
Benchmark land values in viability appraisal

One of the most contentious issues in relation to developers’ project viability appraisals (carried out for the purposes of seeking to agree reductions in the scale of section 106 affordable housing and other obligations) is the benchmark land value that should be applied as a cost input. Clearly it should not be the actual market value (which would lead to circularity) but equally it should not be just the existing use value (EUV), which would not reflect reality and would result in schemes being assumed to be viable when in reality they would not be because the land would not be made available at the assumed benchmark value. 
The 2012 RICS guidance, Financial Viability In Planning  , advises that it is appropriate to take into account alternative use value (AUV):
“Site Value should equate to the market value subject to the following assumption: that the value has regard to development plan polices and all other material planning considerations and disregards that which is contrary to the development plan.”
As summarised in my 1.12.16 blog post  , the London Mayor is seeking to move away from accepting AUV, preferring an “EUV+” approach, ie existing use value “plus premium”, with the methodology for calculating the premium left undefined, and therefore a recipe for continuing debate. 
In practice, surely any attempt to pitch EUV+ at less than AUV is equivalent to restricting the application of the “no scheme world” rule – a policy intervention to apply that shortfall for public purposes. Except that with viability negotiations, it could of course lead to development simply not proceeding. Is there then a stalled scheme and grounds for compulsory purchase? The extent to which this sort of economic intervention is acceptable needs to be carefully limited and defined. 
CIL reform

There have been rumours that the reason why the Government parked in February any response to the CIL review team’s report was that the new ministerial team had started to think about whether in fact any replacement for CIL should encapsulate land value concepts (memories of the planning gain supplement anyone?). There is certainly no mention of CIL in the Conservative manifesto. Certainly the policy priorities as between CIL and affordable housing need to be reconsidered. 

If we weren’t in such dire straits, we could of course go back to a position where the state invested in social housing and funded public services without weighing the costs so heavily on land owners and developers. In the meantime, over the next five years we’ll definitely see answers emerge to those questions I posed back at the beginning of this overlong post. 
Simon Ricketts 20.5.17

Personal views, et cetera

Regeneration X: Failed CPOs

The Secretary of State’s decision letter  dated 16 September 2016 in relation to the Aylesbury Estate CPO has major implications for all regeneration schemes, including the approach that LPAs should take to planning applications. However, in my view it was not unsurprising in the light of other recent decisions. 

The whole of the decision letter is worth reading but I quote the most relevant passages below. It will be seen that the critical failings of the proposals in the eyes of the Secretary of State were (1) the impacts on displaced leaseholders who might not be able to remain in the area and (2) the potentially disproportionate or at least unassessed effects of the proposals on specific protected groups under the Equality Act 2010. 
 “20. the options for most leaseholders are either to leave the area, or to invest the majority of their savings in a new property. Article 8(1) [of the European Convention on Human Rights – right to respect for private and family life] is therefore clearly engaged. In relation to Article 8(2) (which permits interference which is proportionate when balanced against the protection of the rights and freedoms of others), the Secretary of State finds that the interference with residents’ (in particular leaseholders’) Article 8 rights is not demonstrably necessary or proportionate, taking into account the likelihood that if the scheme is approved, it will probably force many of those concerned to move from this area.

21. For elderly residents, who are of an age where they would probably be unable to obtain a mortgage to make up any shortfall and their future earning potential is likely to be limited, using their savings and other investments would severely limit their ability to choose how they spend their retirement and the use to which they put their savings and investments. The leaseholders are not obliged to accept either of the options to them (shared ownership or shared equity) to stay on the Estate, and could potentially purchase a property on the open market. However, many of the leaseholders will probably be unable to afford these options and will have to move away from the area. The likelihood that leaseholders will have to move away from the area will result in consequential impacts to family life and, for example, the dislocation from local family, the education of affected children and, potentially, dislocation from their cultural heritage for some residents.

22. Article 1 of the First Protocol of the ECHR entitles a person to peaceful enjoyment of their property, but also stipulates that this provision does not impair the right of a state to enforce such laws as it deems necessary to control the use of property in accordance with the general interest. As mentioned below, the Inspector in this case found that the interference with residents’ peaceful enjoyment of their property was not necessary to control the use of property in accordance with the general interest, and accordingly that the interference with Article 1 of the First Protocol was not proportionate (IR422). The Secretary of State agrees that interference with the residents’ human rights is not proportionate in all the circumstances.

23. In making this decision, the Secretary of State must give due regard to the need to (a) eliminate unlawful discrimination, harassment, victimisation; (b) advance equality of opportunity between persons who share a relevant protected characteristic and persons who do not share it; and (c) foster good relations between persons who share a relevant protected characteristic and persons who do not share it. Protected characteristics are: age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex and sexual orientation. This arises from the Public Sector Equality Duty, under section 149 of the Equality Act 2010.

26. The negative impacts on protected groups would include the effect of the impact on elderly leaseholders currently resident on the Estate, as identified at IR 372 to 373 and IR 401 and 402, namely the fact that many of the leaseholders (who will have no right to be accommodated in the scheme) are of an age where they would probably be unable to obtain a mortgage to make up any shortfall and their future earning potential is likely to be limited. Using their savings and other investments would severely limit their ability to choose how they spend their retirement and the use to which they put their savings and investments. The leaseholders are not obliged to accept either of the options open to them (shared ownership or shared equity) to stay on the Estate, and could potentially purchase a property on the open market. However, many of the leaseholders will probably be unable to afford these options and have to move away from the area. This is likely to impact particularly on those with the protected characteristic of age, including in relation to the care of older relatives and children’s education (as people have to move out of the area, this will mean that the elderly are deprived of having a local family to care for them, and the children of those parents affected are likely to have to move schools when their family moves to a different area).

27. This impact on the care of older relatives may adversely affect their ability to see and be cared for by their family and potentially to integrate with the rest of society (for instance, without a family member to accompany them in a car or on public transport it may be harder for them to access the shops and public facilities like the GP surgery or local library as they will lack the freely offered assistance to do so) and therefore breaches the PSED requirement to have due regard to the need to foster good relations between persons who share a relevant protected characteristic (the elderly) and persons who do not share it (the rest of the population).

28. The impact on children’s schooling may result in adverse impact on the child’s exam performance and their school reports. This is in turn likely to result in a lower level of achievement than otherwise might have been the case, which is likely to result in a lower level of opportunity for the affected child in terms of their ability to apply successfully for jobs (thus adversely affecting equality of opportunity) and – in terms of uprooting them at a vulnerable stage in their development – a negative impact on the affected child’s good relations with their family and extended social contacts (they are likely to go through a period of isolation as a result of being uprooted from the social networks they had established at their previous home).

29. Given the lack of clear evidence regarding the ethnic and/or age make-up of those who now remain resident at the Estate and who are therefore actually affected by any decision to reject or confirm the Order, it is not possible to clearly identify BME groups (either of the elderly or children) as disproportionately impacted by the proposal. However, given that 67% of the population living on the Estate were of BME origin (see IR 394), it is highly likely that there is a potential disproportionate impact on the elderly and children from these groups, who are likely to dominate the profile of those remaining on the Estate and who are therefore likely to have to move out of the area if the Order is confirmed.

32..there is a shortage of evidence concerning the precise ethnic make-up of those remaining resident at the Estate, who would be affected by a decision to confirm the Order (see above). If, in practice, the cultural and/or ethnic make-up of those resident at the Estate, who are unlikely to be able to remain there, is pre-dominantly those of one or more particular ethnic/ cultural origins, then their cultural life is likely to be disproportionately affected by a decision to confirm the Order. There is also likely to be a negative impact on their ability to retain their cultural ties, undermining their equality of opportunity with other ethnic groups (such as white British) who may not be so disproportionately affected. This is particularly so, in that white British culture is more widely-established across the UK, including at housing sites to which residents may be moved, whereas minority cultural centres are often less widespread, which is likely to make cultural integration harder for those of BME origin who are forced to move than those of a white British origin.” 
For more detailed background London Borough of Southwark’s statement of case  and the leaseholders group’s statement of case  may be of interest. 

In my view, the decision by the Secretary of State, whether justified on the evidence or not (Southwark are reportedly challenging it) is not unexpected following Horada (on behalf of the Shepherds Bush Market Tenants Association) and others v Secretary of State  (Court of Appeal, 18 March 2016) where the Secretary of State’s approach to the Shepherds Bush market CPO was struck down on similar issues. 

The Inspector hearing the Shepherds Bush market CPO inquiry concluded: “the current Orion proposal [which was the basis for the CPO] lacks the mechanisms to be assured of retaining the number, mix and diversity of traders in the way explained above. They are vital to the distinctiveness of the market and the Goldhawk Road shops. Therefore, insofar as it would facilitate delivery of the redevelopment scheme promoted, the CPO would not fully achieve the social, economical and environmental well-being sought”.
The Secretary of State disagreed and confirmed the CPO. The Court of Appeal held that the Secretary of State had acted unlawfully as his reasoning for reaching a different conclusion had been inadequate (shades of the Dover reasoning flaws covered in my last blog post  ):
“In short, although it is clear that the Secretary of State disagreed with the inspector’s view that the guarantees and safeguards were inadequate he does not explain why he came to that conclusion. I do not consider that requiring a fuller explanation of his reasoning either amounts to requiring reasons for reasons, or that it requires a paragraph by paragraph rebuttal of the inspector’s views. But it does require the Secretary of State to explain why he disagreed with the inspector, beyond merely stating his conclusion that he did. The two critical sentences in the decision letter are, in my judgment, little more than “bald assertions”. The Secretary of State may have had perfectly good reasons for concluding that the guarantees and safeguards were adequate. The problem is that we do not know what they were. In those circumstances I consider that the traders have been substantially prejudiced by a failure to comply with a relevant requirement.”

As regards Southwark’s failure to comply with the Public Sector Equality Duty, there are certainly echoes of the ruling by the Court of Appeal in one of the rounds of the Wards Corner saga in R (Harris) v London Borough of Haringey  (Court of Appeal, 5 May 2010) where the court held that the council, when granting permission, failed to discharge its duties under section 71(1) of the Race Relations Act 1976 (now replaced by the Equality Act 2020 Public Sector Equality Duty) in terms of the potential effects of the scheme on Latin American traders or loss of housing by ethnic minorities.

To add a further Court of Appeal ruling into the blog, Grafton Group (UK) plc v Secretary of State  (Court of Appeal, 21 June 2016) is another recent example of a CPO (in this case to seek to protect Orchard Wharf in London’s docklands for operational purposes) being struck down. In this instance, the Secretary of State’s reasoning for confirmation the CPO was held to be inadequate given that the basis for the CPO was a development proposal, planning permission for which had been refused. 
For any of these schemes to fall over at the last hurdle may be seen as a victory to some but is often a tragedy to others who have spent years seeking to secure outcomes that have previously been accepted as being in the public interest. The main lesson for all of us is surely that we need to go the extra mile (or more) to seek to ensure that the likely effects of the scheme and/or dispossession on all of those likely to be affected are properly analysed, that the analysis takes full account of the Public Sector Equality Duty and that any material effects are explained and justified. 
Simon Ricketts 22.9.16
Personal views, et cetera