Compulsory purchase reform and directions on hope value

Hope value is the part of a land price that reflects the prospect of planning permission rather than the current use. Under the compensation code a claimant whose land is compulsorily acquired has normally been entitled to that element, and the Levelling-up and Regeneration Act 2023 changed that for a defined set of schemes by allowing the confirming authority to direct that certain planning permission assumptions are disregarded.

If you are promoting land that sits within a regeneration area, an estate renewal scheme or a site a council has earmarked for affordable housing, this alters the downside case. It does not change the value of land the council is not acquiring.

How compensation is assessed under the code

The compensation code is not a single statute. It is a body of law built mainly from the Land Compensation Act 1961, the Compulsory Purchase Act 1965, the Land Compensation Act 1973 and the Acquisition of Land Act 1981, together with the case law that interprets them.

The governing principle is equivalence: the claimant should be no better and no worse off in money terms than before the acquisition. Compensation heads generally comprise the value of the land taken, compensation for injurious affection and severance where only part is taken, disturbance, and the statutory loss payments.

Value of the land taken is assessed on the open market basis in rule 2 of section 5 of the 1961 Act, which asks what the land would fetch if sold by a willing seller. That question cannot be answered without deciding what planning permission a purchaser would assume, which is where hope value enters.

What hope value means in valuation terms

A field on the edge of a town with no allocation and no permission has an agricultural value. If the local plan is under review and the field has been promoted, a purchaser will pay more than agricultural value for the chance that permission follows. That premium is hope value.

Valuers usually express it as a proportion of the difference between existing use value and full development value, discounted for the probability of consent and the time it will take. The discount is a matter of judgement, and the range between two competent valuers on the same field can be wide.

Under the no-scheme principle in the 1961 Act, as recast by the Neighbourhood Planning Act 2017, the valuation ignores the scheme underlying the acquisition and any increase or decrease in value caused by it. So the hope value you are entitled to is the hope that existed in a world without the compulsory purchase scheme, not the hope the scheme itself created.

The direction power the 2023 Act introduced

The Levelling-up and Regeneration Act 2023 amended the Land Compensation Act 1961 so that a compulsory purchase order can be accompanied by a direction removing the effect of the prospective planning permission assumptions on which hope value depends. Where a direction is in force, the land is valued without those assumptions, and the compensation falls towards existing use value plus the other heads.

The power is conditional rather than general. The acquiring authority must be one of the types the legislation specifies, the scheme has to fall within the stated purposes, which centre on affordable and social housing, education and health facilities, and the confirming authority must be satisfied that removing the assumptions is justified in the public interest.

Check the current statutory text before relying on any summary of it, including this one. Compulsory purchase provisions have been amended repeatedly, commencement has been staged, and legislation.gov.uk carries the 1961 Act as amended. Note: the position described here is as at 16 September 2026.

Which schemes a direction may reach

The practical filter is purpose and promoter. A direction attached to an order for a council-led affordable housing scheme is within the intended scope. A direction attached to an order enabling a commercial redevelopment is not.

That distinction produces a reasonably clear risk map for a land promoter.

The risk map is about the direction, not the order. Land can still be compulsorily acquired for any of these purposes. The question the direction answers is what you are paid.

Effect on negotiation strategy

Most compulsory purchase orders are resolved by agreement before vesting. The existence of the direction power changes the shape of that negotiation because it caps the acquiring authority's downside if talks fail.

Three responses are worth considering early. First, engage during the plan-making process rather than after the order is made, because the allocation position is part of what the valuation reflects in the no-scheme world. Second, get the valuation evidence assembled before the order is published, since contemporaneous evidence of market interest is more persuasive than reconstructed evidence. Third, test whether the scheme really falls within the qualifying purposes, because a direction outside the statutory conditions is challengeable.

There is also a viability dimension. Where you are negotiating over a site the authority may otherwise acquire, the evidence you would put into a Viability Assessment for a planning application overlaps substantially with the evidence you need for compensation. Prepare it once.

Certificates of appropriate alternative development

Where land is acquired and its development potential is disputed, a claimant can apply to the local planning authority for a certificate of appropriate alternative development. The certificate states what planning permission, if any, would have been granted for the land in the absence of the scheme.

The certificate is a useful mechanism because it converts a valuation argument into a planning one, decided by the authority with a right of appeal. It also disciplines the claim, since a certificate refusing any alternative development largely ends the hope value argument.

The 2023 Act altered aspects of the certificate regime, including the timing at which the assessment is made. That change matters for cases already in progress. Read the current provisions and the accompanying guidance rather than relying on textbooks published before the Act.

Checking the commencement position

Planning legislation frequently sits on the statute book uncommenced, and compulsory purchase reform is no exception. Before advising a client, check three things: whether the relevant provisions are in force, whether any regulations needed to operate them have been made, and whether transitional provisions apply to orders already made.

The reliable sources are the amended text on legislation.gov.uk and the government's published compulsory purchase guidance. Following reform generally is easier through a timeline than through the Act itself, and the planning law updates timeline is one place to do that. The same discipline applies to any recent change, whether that is citing the NPPF after the move to policy codes or working through Class MA after the removal of the floorspace cap.

Browse the full set of report types on PlanScope if you are scoping the evidence base for a site that may be affected.

This is general guidance rather than legal advice, and compulsory purchase compensation is a specialist field where valuation and legal advice should be taken on the specific facts. PlanScope provides AI-assisted draft reports for planning applications. Reports should be reviewed before submission. We do not guarantee planning approval.