What’s changing, why it matters, and what it means for landowners
When the government wants to build things like roads, railways, schools, hospitals, housing, or other major public projects, it sometimes needs land that is privately owned. If the owner doesn’t want to sell, the government (or a council) can use a legal tool called compulsory purchase. This allows them to buy the land without the owner’s consent, as long as the project is genuinely in the public interest.
A big political focus today is on how much compensation landowners should receive when this happens — especially when the land has the potential (but not yet the permission) to be developed.
Recent and proposed reforms aim to limit “inflated” compensation so that major housing and infrastructure projects become cheaper to deliver. But this has created tension between developers, governments, and landowners.
This article explains how compensation works now, and what may change.
What Is Compulsory Purchase?
Compulsory purchase is when a public body — like a council or government department — can legally take land even if the owner doesn’t want to sell. But this can only happen when the project is considered necessary for the public good.
Common examples include:
- New roads and railways
- Electricity, water, and sewage projects
- Schools and hospitals
- Urban regeneration
- New housing developments
Without compulsory purchase, large projects would be impossible, because a single owner refusing to sell could block progress.
How Is Compensation Currently Set?
The law tries to ensure that landowners are left in roughly the same financial position they would be in if their land wasn’t taken. The starting point is:
The Open Market Value
This means: how much the land would sell for if listed on the open market, with a willing buyer and a willing seller.
The key assumption is that the compulsory purchase project itself is ignored when deciding market value.
(Otherwise land next to a planned railway would suddenly become hugely expensive.)
How Is “Development Potential” Valued?
Land is worth more if something can be built on it — or if something might be built on it in the future. Two important concepts deal with this:
1. Appropriate Alternative Development
If it’s reasonable to assume that planning permission would likely have been granted for some kind of development (if the project wasn’t happening), this can increase compensation.
This can be proven by:
- agreement between the owner and acquiring authority
- a decision by the Lands Tribunal
- or a certificate from the local planning authority
2. Hope Value
This is the extra value land might have because there is a chance that planning permission might be granted in the future — even if none exists today.
Hope value is speculative, so it adds less value than confirmed planning permission but can still significantly boost compensation.
This is the part the government wants to reduce.
What Changes Have Already Been Made?
The Levelling-up and Regeneration Act 2023 gave the government the power to:
- ignore “appropriate alternative development”, and
- ignore “hope value”,
when calculating compensation — but only for CPOs used for:
- housing
- education sites
- NHS facilities
These limits require the approval of a government minister and must be justified as being in the public interest.
What Future Reforms Are Being Proposed?
The Labour government has signalled that it wants to expand these powers so councils can buy land for major developments at fair prices, not inflated ones.
Key ideas include:
- More situations where “no hope value” compensation can be applied
- Lower compensation for land needed for affordable housing and key infrastructure
- Making it easier and cheaper to acquire land for public benefit
The aim: reduce land costs so more homes and infrastructure can be built.
Why Is This Controversial?
Supporters say:
- It will make land cheaper to buy for regeneration and housing
- Councils can build more affordable homes
- Developers can’t hold out for high speculative payouts
Housing associations and councils strongly support these changes.
Opponents say:
- Landowners will be forced to sell for far below future market value
- Farmers and rural landowners could lose out
- Developers might profit from cheap land at the landowner’s expense
The Country Land and Business Association argues this is unfair — especially for farmers affected by large projects.
Modernising the System
The compulsory purchase laws are extremely old — some date back to 1845. The Law Commission is now reviewing the entire system, aiming to:
- simplify the laws
- update compensation rules
- draft a modern replacement bill
A consultation paper is expected soon, with full reforms likely during this Parliament.
Frequently Asked Questions
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What is compulsory purchase?
It’s when a public body can legally buy land even if the owner doesn’t want to sell — but only for projects that benefit the public.
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Do landowners get paid fairly?
Yes. The aim is to pay what the land would be worth on the open market — ignoring the project itself. Extra payments can cover losses or moving costs.
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What is “hope value”?
Hope value is the extra worth land might have because there’s a chance planning permission could be granted someday.
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Why does the government want to limit hope value?
Because it can make land far more expensive, which can block or delay new housing, schools, or infrastructure.
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Will owners lose out if hope value is removed?
Potentially, yes — compensation might be lower compared to today. But supporters say projects will be cheaper and faster to deliver.
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What is “appropriate alternative development”?
It’s when the land would likely have received planning permission for something else if the compulsory purchase wasn’t happening.
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Who decides compensation if the parties disagree?
A specialist court — the Upper Tribunal (Lands Chamber) — makes the final decision.
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Can councils now ignore hope value?
Yes, but only in certain cases (housing, schools, NHS sites) and only with ministerial approval. The government wants to expand this.
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Will future law changes apply to all compulsory purchase?
Possibly. The government is consulting on expanding the rules so more projects can use “no hope value” compensation.
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Why is there a political debate about this?
Because it pits public interests (affordable housing, infrastructure) against private rights (fair compensation for landowners).
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When will the law change?
A Planning and Infrastructure Bill is expected soon, and the Law Commission is preparing recommendations. Reform is very likely during this Parliament.
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