Housing delivery stalling - role of local authorities

Stalling housing delivery and very low development starts on site is a critical issue at both local and national levels. Whilst there are multiple causes for the steep reduction in starts, developers (especially of flats) are reluctant to press “go” given: (1) pre-sales necessary to satisfy banks’ funding requirements (especially to international buyers) are in decline; (2) mortgage and deposit affordability for domestic buyers has frozen many would-be buyers out of the market, and this has been exacerbated by the discontinuance of help to buy; (3) buy to let returns are under pressure discouraging domestic investors; and (4) uncertainty as to the future trajectory of housing values, are each reducing effective market demand and increasing the perceived risk of not finding sufficient buyers of whole blocks at current prices. Added to these pressures, construction costs have increased steeply since 2021, which limits developers’ ability to sell flats at prices that potential buyers could afford. 

Taken together with the Greybelt permissions encouraging developers to carry out less risky greenfield development, the result is stalling starts and much reduced delivery - especially in London. National housebuilders have moved their activities out of the capital to areas where planning policies allow lower density developments (predominantly houses), which can more easily be tailored to meet the ebbs and flows of market demand. 

Fundamentally, however, housing need in contrast remains as pressing as ever. The problem is that that housing need does not become effective demand for market housing because of affordability constraints. How to square the circle?

The MHCLG and the Mayor of London have proposed wholesale temporary measures to CIL and Affordable Housing requirements to “aid viability”[1] but private sector delivery still faces the fundamental issue of lack of effective demand for the market housing provided in the current market at current prices and mortgage rates.

The private sector will not commence construction of blocks of flats when there is lack of confidence in adequate effective demand for them at current anticipated prices. In most cases, developers cannot sell at units at reduced prices that buyers might be able to afford without sacrificing profit margin or reducing their offers for land. Working on a reduced profit margin in the context of heightened sales risk is unlikely to be an option that many developers would countenance. 

The result is that sites ripe for housing development are sitting unused in the middle of a national housing crisis – with no delivery of market or affordable housing. 

A key mechanism to go some way to meet the housing need has been via Section 106 agreements to deliver affordable housing as part of market led schemes – the profitability of the market housing making the schemes (amply) viable (as demonstrated by the profit and share price performance of the major house builders in recent years). But that mechanism is currently at risk of providing neither market nor affordable housing. Delivery issues have been compounded by lack of appetite among many registered providers to acquire new housing being made available by developers.

In the meantime, local housing authorities face the crippling revenue costs of provision of temporary (often inadequate and sub-standard) housing in an attempt to meet housing need.

All this, in the context of: (1) the Government’s central aim of delivery of 1.5m new homes this Parliament – a rate of building which has never been met except where large scale public housing development has been undertaken (private sector and housing association completions rarely exceed around 150,000 per annum, as can be noted in Figure 1); (2) constraints on public spending; and (3) the housing crisis rising up the national political agenda.

Figure 1: Permanent dwellings completed 1969/70 – 2023/24
(click here to expand)

Time for local authorities and government to think outside the box?

The current proposals in London

The MHCLG/GLA Proposals are (for a time limited period) to reduce the affordable housing ‘fast track’ threshold to 20% across the board irrespective as to scheme-specific viability; to reduce CIL contributions to local authorities (but not the Mayor) by 50% across the board irrespective as to viability and to give the MoL extensive call in powers if he considers that permission should be granted on these new terms in the face of local authority opposition. The clear intent is to seek to force LPAs not to seek compliance with their own AH policies - which in some cases require 50% on a 60/40 tenure split, subject to scheme-specific viability with many local plans also providing for the 35 Fast Track. At the same time, MHCLG is pressing ahead with its plans to introduce a Building Safety Levy, which will blunt the incentive arising from reduced borough CIL liabilities. 

The MoL and MHCLG proposals are explicitly with a view to “aid viability”. Given that: (1) the proposals apply irrespective as to the current viability of the project; (2) viability is already a central feature of the planning system for housing and is well matured in London; and (3) any development which has become unviable can readily apply under s.106A to amend the obligations, here “aiding viability” does not mean making unviable schemes viable but can only mean making schemes more viable and thus providing an increased incentive for developers through higher profits and/or land owners through higher land values to bring forward development.

But this will, by definition, only potentially assist at the margins (particularly in relation to CIL, which typically accounts for 2% to 4% of development costs) – because it does nothing to address the fundamental market impediments to delivery summarised in rthe first paragraph above (namely lack of buyers with the means to purchase). The proposals will not do anything to generate effective market demand for market housing. Indeed, by increasing the proportion and total number of market units the proposals will tend to exacerbate those problems – more market units where there is a lack of market demand.

Further, the proposals will predominantly benefit landowners by increasing land values – the lower the affordable housing and other requirements, the higher the residual land value. They thus constitute a straight transfer of value from affordable housing to land – and is directly inconsistent with the policy thrust of recent years of avoiding land value growth at the expense of affordable housing – the circularity at which the PPG was directed – the higher the land value the less affordable housing that could be afforded.   

It is correct that developers may then generate increased profits from having a higher proportion of market housing in their developments – but that presupposes effective market demand at current prices for those units which is belied by the evidence. Improved viability and enhanced profits ‘on paper’ are meaningless unless developers actually build a scheme and sell the units. 

Thus, at best, the proposals address only a small part of the impediments to delivery problems in the market and the fundamental impediments remain. How then to deliver “starts”?

Meeting the Need

Potential solutions to addressing the lack of effective demand for market housing in a national housing crisis are either: (1) to deliver more market housing knowing that to do so will force prices down and so something developers will not do; (2) subsidise buyers to bridge the gap between the amounts they can afford to borrow and the prices they need to pay (something that the government does not currently appear to be willing to do); or (3) to deliver more - not less – affordable housing. How?

Government is encouraging local authorities to deliver their own schemes under the Social and Affordable Homes programme 2026 – 2036[2]. Homes England or devolved funding from the MOL is obviously important but so too is the availability and cost of land. Fortunately Parliament has provided a route through that.

LAs have power to compulsorily acquire land for housing. Until now, they have proved reluctant to use those powers given the risks involved. First, the land value is only fixed well after the acquisition and by pursuing a CPO without knowing what that sum will be, the local authority will be at risk of signing a (largely) blank cheque. Second, they would only be able to deliver similar amounts of affordable housing to that which a private development would deliver if the land price includes hope value and so there is often thought to be little “gain” for the risk. Third, LAs do not generally have significant recent experience in large scale housing delivery. 

S190 Levelling Up and Regeneration Act 2023

Whether, to what extent and how to capture uplifts in land value resulting from grant of planning permission has been the subject of continued debate including as to whether s106 and CIL contributions were sufficient.

In 2018, the Housing, Communities and Local Government Select Committee report - “Land Value Capture” recommended changes to the Land Compensation Act 1961 to allow LAs to CPO land “at a fairer price”  without “hope value” which was described as a value reflective of speculative future planning permissions serving to “distort land prices, encourage land speculation and reduce revenues for affordable housing, Infrastructure and local services”. It recommended that increases in land value consequent on planning permissions be shared with the local community.

In 2021, the then Government emphasised the importance of CPO as a means to “Build Back Better High Streets” and in 2022, of empowering local communities to take the lead and be given the tools to succeed. Various changes to the CPO system were proposed.

In 2023, the then Government consulted on changes to hope value compensation on CPOs: with landowners entitled to “fair value” but “not lead[ing] to elevated levels of compensation and [compensation] costs being paid for prospective planning permission that would result in more than fair value being paid”  - in order to ensure viability of the publicly led schemes or to support greater affordable housing or enhanced infrastructure improvements. The Government’s proposal sought to deliver “fair” value in the light of A1P1 considerations, whilst “ensuring that schemes for the public benefit are deliverable and the enhancement opportunities which arise from them are maximised”. The provision of a direction removing or partially removing hope value in a CPO would provide upfront certainty, giving more confidence as to viability and delivery of the public benefits, avoiding lengthy disputes as to hope value “particularly where the viability of the scheme or the delivery of the benefits of the scheme depend on the value paid for the underlying land”. Fair value would not be less than existing use value. Local authorities would have to estimate the land value that would thus be captured and how it would be applied to the scheme for the public benefit.

Through that consultation, all the A1P1 arguments which would be expected to be raised were raised and fully considered by the Government. It decided to ask Parliament to legislate noting that it would be for acquiring authorities to undertake full proportionality assessments so they can be satisfied that a fair balance has been struck between the rights of the landowner and the general interest of the community.

In promoting s.190, the minister noted that the legislation was focussed on “societal priorities” and for use by public authorities who are “most likely to be able to provide the necessary evidence to demonstrate that payment of compensation below market value would be justified in the public interest”. There “will be cases where the non-payment of hope value compensation will enable vital affordable housing…to be brought forward that otherwise might not be” – with “more land value to be captured by public authorities and invested for the public benefit.”

The short point is that the statutory purpose was to allow more land value to be captured for e.g. affordable housing in an appropriate case.

S190 thus provides that:

1. an acquiring authority can include in a CPO a direction that compensation would be assessed in accordance with s.14A of the Land Compensation Act 1961 – namely it being assumed that no planning permission would be granted for development on the land;
2. If it does so it must set out a statement of commitments as to what the development would deliver in terms of e.g. affordable housing to show that the direction is justified in the public interest;
3. The confirming authority may confirm the CPO with or without the direction;
4. The acquiring authority will then be held to the statement of commitments with extra compensation being payable if it fails to do so.

This gives effect to the Parliamentary purpose by explicitly providing for, without caveat, land value capture for public goods subject only to the normal CPO tests (compelling case in the public interest) and the direction being justified in the public interest. This is in principle no different from a decision to impose a tax on land value increases from planning permission  - it is just more bespoke.

Parliament does not legislate in vain and therefore it intended that the provision be used and thus that there would be cases where the “justified in the public interest” and A1P1 requirements would be met. Parliament accepted the principle of the capture of land value being potentially A1P1 compliant and left it to individual decision making as to whether it was justified in the public interest on the specific facts.

The result would be that the landowner would secure existing use value (or the value of existing permissions on the land) and no hope value. The hope value would instead be available to ensure that projects with, depending on the existing nature of the site and thus its existing use value, potentially higher  levels of necessary affordable housing being viable and deliverable. 

This was undoubtedly a substantial change in the compensation code on CPO – equating existing value with fair value in an appropriate case.

A1P1 Compliance and Arc

The power has not yet been used or tested. Uncertainty as to how the SoS as confirming authority and the Courts on a challenge under A1P1 would react to such proposed directions is often cited as discouraging CPOs.

However, the recent Divisional Court case of R (ARC) v. Secretary of State for Housing, Communities and Local Government I [2025] EWHC 2751 (Admin) provides a useful framework for considering the A1P1 issues.

It concerned the compatibility of legislative changes to e.g. exclude marriage value in the calculation of sums payable on leasehold enfranchisement with A1P1. The changes reduced the quantum payable for enfranchisement with the value thus being transferred from the landlord to the leasehold owner.

The Aim of the Measures: The first stage is to ascertain from the statutory language used and other admissible material, the aim of the measures. The Claimants contended that the aim was to make enfranchisement cheaper and easier for leaseholder owner-occupiers. Having reviewed the statutory language, the statutory background, the statements to Parliament and previous statutory interventions, the Court took a much broader approach to the statutory purpose based on the history – namely to address and overcome the unfairness of the leasehold model arising from the leasehold being a wasting asset and the lack of security and control of the leaseholder [309] so as to rebalance power in the market and empower leaseholders (not limited to owner occupiers) whilst maintaining the legitimate rights of freeholders [332] and to reduce the costs of the process [333]. This broad categorisation of the legislative aim was fundamental to the logic which followed in terms of the A1P1 exercise.

Those were legitimate objects for A1P1 purposes [334] even though they involved the compulsory transfer of property [335]. The view of Parliament was to be accorded considerable deference and it had a wide margin of appreciation [140-160; 335].

The measures were rationally connected with the purposes. The Court considered whether less intrusive measures would have achieved the purposes [for marriage value see 443-452] – the lesser measures postulated would not have achieved the fundamental aims of the reforms. A generally applicable approach was within the margin of appreciation.

“Fair Balance”: It then considered whether a “fair balance” had been struck [453-468] - namely whether the compensation was “reasonably related” to the reversion of which the landowner was being deprived. Promoting economic, social or political reform may justify a substantial departure from full compensation [455]. The legislation would leave intact the investment value of the interest in the land and dwelling without marriage value. The issue was a structural issue of reform - and Parliament had been entitled to reach the judgement it had.

The read across to s190 is obvious and compelling. Here the purpose is land value capture to facilitate the delivery of additional affordable housing. The removal of hope value within the statutory structure of s.190 achieves that. Less intrusive measures would not achieve (absent some unforeseeable evidence) would not achieve the purpose. A fair balance is potentially struck - the landowner would still get the existing use value, just not the uplift in value attributable to the hope of a grant of planning permission.  

A paradigm case for s.190

Most local authorities will have identified multiple sites suitable for dense, flatted development in sustainable locations to meet urgent self-contained housing needs. Others especially in inner cities will have few sites but a very high housing need such that there is a pressing need to ensure all such sites optimise delivery of C3 housing including a high proportion of affordable units.

Take a paradigm case (there will be many permutations of the paradigm but the principles will apply to all exhibiting key features):

1. a local plan policy for affordable housing at (say) 40% (justified by reference to generic viability testing using a standard approach to benchmark land value – “BLV”);
2. a vacant, derelict or disused site with limited realistic existing use value (“EUV”) and no greater alternative use value (“AUV”) but suitable for dense, flatted development in a sustainable, urban location – the appropriate scale of which is ascertainable;
3. under the NPPG, on a planning application seeking less than policy compliant 40% AH, the development appraisal would have to show a residual land value that  equalled the BLV but anything above that would be available for AH, CIL and other obligations. Thus any planning permission would implicitly assume that the landowner would, if selling the land for development, all other things being equal, receive the BLV and no more;
4. the landowner leaves the site unused and undeveloped with no planning permission secured – perhaps because not content to receive the BLV; or hoping to secure a much larger scale of development at some future point; or not seeking a permission in the hope, for example, that AH policy requirements would reduce (as now proposed in London, albeit on a temporary basis only);
5. the Council has a large unmet housing need and maybe also does not have a 5 year HLS and/or fails the Housing Delivery Test;
6. the LPA reaches a judgement that it is necessary for the site in question to come forward to meet the planning need in the public interest;
7. the landowner consistently fails to move towards delivery – preferring to sit on the land asset until the economics improve or the Council moves on the acceptable scale of development;
8. h. the Council judges that the point has come where CPO is justified to deliver the housing and in particular the AH – and that the AH percentage should be higher than that achievable with the BLV and up to or even in excess of that  required by policy – especially if grant was made available from the public authority concerned from historic in lieu payments to it;it intends to have a back to back deal under which it acquires under the CPO and the immediately sells on the land with an obligation to deliver the development including the 60% AH - at a price which reflects those obligations;
9. the whole structure is dependent on, and only deliverable on the basis of, the compensation by way of land value being capped at the EUV (not EUV+);
10. the landowner thus loses the “+” which would be available to it if it went to the cost, effort and difficulty of bringing forward the land itself (or potentially something more than “+” if it sold it for development - with all the associated costs and uncertainties).

In such a situation the landowner would be “losing” the uplift in value from development which would be transferred from land value into affordable housing. There would, essentially, be more land value capture for the public at the expense of the landowner. On the other hand, the landowner was not delivering and was leaving it to the state in the form of the local authority to deliver, was not taking risk and would, absent s.190 thus benefit from the CPO because they would get at least the BLV (EUV+) without having to do anything.

The logic of S.190

S190 has not yet been used nor been subject to authoritative ruling as to its purpose. Very unfortunately, neither Homes England nor any major authority has yet tested the ambit of s.190.

However, from the wording of it, its context, the statutory background and the statements in Parliament from ministers leading to its enactment it is clear that the Parliamentary purpose was to enable the capture of more land value for affordable housing in appropriate cases – a purpose which Parliament obviously judged legitimate.

Parliament does not legislate in vain and it must have intended that there would be circumstances in which the use of s.190 was appropriate and thus proportionate and as such was A1P1 compliant.

It is difficult to postulate a more obvious paradigm case of such appropriateness to that set out above.

Of course fairness cuts both ways – why should a landowner who is sitting on land and has done nothing to realise its potential in the midst of a national housing crisis secure hope value just because the state has stepped in because of their inaction?

A possible approach

Local authorities should identify vacant land previously identified as suitable for intense development which has stood dormant for a prolonged period.

They should write to landowners seeking proposals for bringing the land forward to meeting housing needs. After a couple of chasing letters over a few months, a more robust letter stating the extent of the housing need, the difficulty of finding adequate sites and the compelling need in the public interest to meet housing need, the housing trajectory and to house its population for the land to be brought forward promptly. The potential need for CPO with a direction absent action by the landowner should be raised.

Failing an application for permission of an appropriate scale and mix of development in a reasonable time frame, the CPO with a direction should be pursued.

The justification for the CPO (compelling case in the public interest) and the direction (justified in the public interest adopting a fair balance under A1P1) should be comprehensively set out. The latter would include: (1) the history and lack of action despite every opportunity and encouragement being given; (2) the unacceptability of the land remaining vacant when it is suitable for and needed for intense development to contribute to addressing the housing crisis; (3) what that housing crisis means in the Council’s area including homelessness, substandard housing and its consequences, the financial implications of inadequate housing especially affordable housing, (4) that absent a CPO the hiatus would continue; (5) the only way for the Council to be able to pursue the CPO is with EUV for viability reasons and to enable  a back to back sale under which the statement of commitments would be delivered.

David Forsdick KC is a barrister at Landmark Chambers and Anthony Lee is Managing Partner of Quintic Advisory.

^[1] Whether these proposals address the problem and will deliver a step change in delivery remains to be seen and will be the subject of a follow up article.

^[2] See e.g  policy statement to accompany guidance to bidders – 7^th November 2025