Hope value and how planning treats it

Hope value is the slice of a land price that reflects the chance of planning permission rather than what the land can lawfully be used for today. National guidance on viability takes it out of the benchmark used to test whether a scheme can carry its policy obligations, so a price paid on expectation is no reason for a council to accept less affordable housing. That cuts both ways. It catches the promoter who bought optimistically, and it catches the landowner holding out for a figure the residual will never reach. How planning treats hope value is worth understanding before the option is signed rather than after the refusal.

What hope value is

Hope value is a market idea before it is a planning one. Valuers use it for the uplift a buyer will pay for the prospect of a more valuable use, somewhere between existing use value and full development value with permission in hand.

Its size tracks how likely that permission looks. A site allocated for housing in an adopted local plan carries far more hope value than a paddock in open countryside with no allocation and no settlement boundary within half a mile. Draft allocations, a five-year housing land supply shortfall, a neighbouring consent, even a positive pre-application response all move the number.

In compulsory purchase the concept has statutory treatment: compensation under the Land Compensation Act 1961 has traditionally included the value attributable to the prospect of permission, and the Levelling-up and Regeneration Act 2023 introduced powers for hope value to be directed out of compensation for certain public interest schemes. That is a separate regime from development viability, and the two get muddled in conversation more often than they should.

Why viability benchmarks strip it out

Planning Practice Guidance on viability sets the benchmark land value using existing use value plus a premium to the landowner. Existing use value is what the land is worth in its current lawful use, with no assumption of a new permission. The premium is a reasonable incentive for a willing landowner to release the site, and the guidance expects that premium to have been set with policy requirements already in mind.

The consequence is blunt. Where the price actually paid exceeded a policy-compliant residual, the guidance does not treat that price as the benchmark. The purchaser carries the overpayment, not the affordable housing contribution.

Guidance also tells landowners and purchasers to factor policy into the transaction itself. An offer made on the assumption that affordable housing will be negotiated down later is an offer made at the buyer's risk, and a Viability Assessment written afterwards cannot retrofit that risk onto the council.

Landowner expectations in national policy

The Framework has kept a consistent line across editions: the costs of policy should be tested when the plan is made, and the plan's requirements should then be deliverable without a site-by-site argument every time. Where a scheme comes forward on an allocated site, the starting assumption is that it can bear the obligations the plan sets.

The current Framework was published on 17 August 2026 and is organised by policy codes rather than the paragraph numbers used in the December 2023 and December 2024 editions. Check the policy code and the wording on gov.uk before quoting it in a statement, because quoting an old paragraph number is the fastest way to lose an officer's confidence.

Site-specific viability remains possible. The burden sits with the applicant, and the guidance expects assessments to be transparent and published, which in practice means your land price assumptions will be read by the council's own adviser and by objectors.

Option agreements and the overpayment problem

Most hope value disputes trace back to the structure of the land deal rather than the planning merits. Two structures dominate.

An option agreement gives the developer the right to buy, usually at a percentage of open market value with permission less deductible costs, sometimes with a minimum price. A promotion agreement puts a promoter in charge of securing permission and selling the land, with proceeds split after costs.

The trap is the minimum price. Set a floor that assumes a generous unit count and modest obligations, then add mandatory biodiversity net gain under the Environment Act 2021, nutrient or water neutrality mitigation where a catchment demands it, and a policy-compliant affordable housing percentage. The residual drops below the floor, the option is never exercised and the site sits dormant until the agreement lapses.

Deductible cost definitions matter as much as the headline percentage. Whether biodiversity units, monitoring fees and abnormal infrastructure sit inside or outside the deduction can move the landowner's receipt more than a percentage point of affordable housing ever will. Build the deduction list from the actual evidence base the scheme will need, which the index of planning report types sets out by category, rather than from a round allowance.

The effect on affordable housing delivery

Hope value is the quiet reason many schemes arrive with a viability case attached. The applicant has paid a price the policy cannot support and asks for the shortfall to be met from the affordable element, which is the largest soft cost on most residential appraisals.

Councils have two defences. The first is the benchmark itself, applied as existing use value plus premium rather than price paid. The second is a review mechanism in the section 106 agreement, requiring the appraisal to be rerun at a defined trigger, with any surplus converted into commuted payments or on-site units. Early and late stage reviews are now common on larger schemes, and the drafting of the trigger matters more than the percentage agreed on day one.

An Affordable Housing Statement that explains the tenure split, the transfer arrangements and the review position openly tends to get a smoother ride than one that leaves the officer to infer the gaps.

Where hope value resurfaces in negotiation

Formally excluded, practically everywhere. The argument shifts to the size of the premium, where a landowner will press for a multiple of existing use value that quietly reimports the expectation. It shifts to alternative use value, where an unimplemented consent or a theoretical commercial scheme is offered as the real baseline. And it shifts to comparable transactions, where other local land sales are put forward as evidence of the benchmark, even though those sales may themselves be loaded with hope.

On appeal the dispute usually narrows to three or four inputs: existing use value, the premium, the build cost and the sales values. A statement of common ground that isolates those from the agreed facts saves inquiry time and stops the inspector having to reconcile two incompatible appraisals from scratch.

An illustrative land deal

Illustrative example. A paddock behind a village, outside the settlement boundary, with a hedgerow along two sides and a ditch that floods in winter. An option is struck on an assumption of eight dwellings. The local plan review then allocates part of the field for five, leaving the ditch margin as green infrastructure.

By the time the scheme is designed, the biodiversity metric needs off-site units because the hedgerow and ditch cannot absorb a ten per cent uplift on-site, foul drainage needs a pumped connection, and the authority asks for two affordable units. The residual falls short of the option floor. Nothing about the planning judgement was unreasonable. The land price was simply set against a scheme that policy would not permit.

The lesson is procedural rather than clever. Price the land against the policy position you can evidence, test it before exchange, and keep the appraisal inputs in a form you would be content to publish.

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