Heavy-handed laws to protect landowners are strangling investment?

Philip Aldrick Article in The Times 9 November 2019

Response by Ian Lindsay, Senior Partner aspireCP

I have just caught up Philip Aldrick’s article in The Times last Saturday (9/11/19). As Crossrail’s former Property Director I was drawn by the comment …” Now imagine that a public-private corporation was set up in the mould of Crossrail (minus the overruns) to provide a rail link. And imagine it had the power to purchase land at market value…”.
Mr Aldrick has hit upon an important point in that the compulsory purchase powers available to provide rail (and other) infrastructure are currently too narrow. Crossrail’s 2008 enabling legislation ensured the land to be acquired was strictly limited to that needed for the authorised railway works. The problem is that this is not necessarily the same as that land which would make most sense to facilitate the regeneration of areas around the station nor to capture most value for the benefit of the public purse. For any CPO there must be a compelling need in the public interest and yet the CPO is constrained in its ability to acquire incidental land which would help fund such public works.

Land value capture is now an essential tool for infrastructure promoters across the world in order to offset the costs of public transport investment. Crossrail remains the most successful ever UK example, given that more than £1.1 billion of project costs will be met by a range of land value capture mechanisms. However, more value could be captured if the powers to acquire land also took into account the need to optimise value capture and to achieve the best place-shaping outcomes.

My partners in aspire led the assessment of compensation for the Olympic Park to which Philip refers and the suggestion that the state does not have power to ‘purchase land at market value, determined by use not hope’ is incorrect. The law as it stands applies a scheme cancellation assumption, so compensation for the value of the land would not include the benefits of the scheme funded by the public sector.

The main problem for infrastructure projects lies not with the rules for assessment of compensation, but with putting the legislative powers for land which can be acquired by compulsory purchase into “silos”. A Local Authority can compulsorily acquire land for improvement of the economic, social and environmental ‘well-being’ of an area, but a transport authority may only acquire land for transport purposes thereby excluding any adjacent land which could be acquired by a local authority for wider purposes. Surely public need is public need irrespective of who the acquiring authority is?  Why cannot a transport authority acquire land for a combination of public benefits where proceeds from redevelopment of that land are to be used for their primary transport function? Why can a transport authority buy land for a new railway station but not but land for a bus station or land to form a more sensible commercial redevelopment plot around a station? This could help unlock significant additional land value capture for transport projects.

Such compulsory purchase should not ride rough-shod over landowners’ rights, and it must still be necessary to prove ‘a compelling need in the public interest’. However, surely the public interest is best served by looking at the benefits that will be delivered by the project in the round. Moreover, all landowners should of course be adequately compensated for land taken from them according to the principles of the ‘compensation code’, which would recognise any development hope value or planning permissions in place at the time the land is acquired.

It is also possible to work with landowners in these circumstances, as we did at Crossrail, signing up those landowners with development expertise to work with the acquiring body in planning redevelopment and giving them the opportunity to buy the land back at its increased value with a station in situ.  On this basis, the developer earned a profit in line with their risks in constructing and letting/ selling the new space, but with the transport promoter capturing the new infrastructure increment.

The point is that Crossrail could have captured more value and delivered better places and spaces around our stations had greater land and more commercially oriented development plots been secured in the first place. In addition, development of surplus land above stations could have been accelerated if compulsory purchase powers were available to overcome rights of light. These are the opportunities that need to be pursued in the future.

Whilst this summary is believed to be correct at the date of issue neither the author nor aspireCP accept any liability for the accuracy or completeness of the information contained in this article. No part of this document may be copied or re-produced without the written consent of aspireCP LLP