Compulsory purchase orders are “as close as the property industry gets to an authoritarian state”, according to a widely respected contact in the residential sector, who is no stranger to CPOs. My view: they should be used sparingly. But they should be used.
I’ll be discussing the topic during a debate at RESI next month. Views on CPOs are polarised. For the developer, there’s the classic p***-taker to contend with, holding out for the maximum price for his ‘ransom strip’. For the owner of a home, office or land, there’s the prospect of being turfed out. For both camps, there’s the glacial legal progress to endure.
I’m neither a developer nor in the line of sight of HS2. But I do have sympathies with both camps. Here’s my four-point ‘mini-manifesto’. CPOs should be applied:
1. Demonstrably for the greater good. For infrastructure, there should be a clear demonstration of economic benefits. The government is now re-raking the debate on HS2 – a cynic might suggest to divide politicians from uniting against a no-deal Brexit. I’ve no doubts it will get the green light, precisely because CPOs were sent out months ago – the biggest signal in my mind that projects are beyond the point of no return.
Another appropriate use is in complex, residential-led mixed-use schemes, which can clearly improve blighted urban areas, particularly Britain’s high streets.
2. Democratically. The process of identifying properties for CPO must be transparent and consistent across authorities. Owners should be consulted as early as possible during masterplanning to allow objections or seek alternative approaches. The CPO stick should only be brandished after sufficient carrots have been dangled in front of recalcitrant property owners.
3. Expeditiously. In cases where the value of projects has been recognised and full due process observed, in Brexit parlance it’s time to ‘just get on with it’. My contact tells me of one London resi project where the unwilling seller has been holding out, Dad’s Army-like, for the best part of a decade. The HomeOwners Alliance provides a handy guide for would-be ‘remainers’. It’s not uncommon for objections to end in the European Court of Human Rights.
4. Equitably. Here’s probably the trickiest bit: how to fairly compensate owners not just for the current value of the property they are being relieved of but to offer them appropriate ‘upside’ in regeneration projects. What would their home or site be worth surrounded by shiny cafés and co-working spaces – rather than charity shops and tanning bars? In France, public bodies have to pay 1.5x the price but what is 1.5x virtually nothing at all?
One idea: pay a cash consideration up front for the property as is and offer shares in a special-purpose vehicle owning the whole site or warrants to buy them at a future date. This raises fears among developers of all the owners holding out for more. But to reinvigorate urban centres all parties need to give some ground. It’s time for some bigger-picture thinking – possibly also tying in reconsiderations of section 106 burdens that can be shared out more equitably with existing owners?
Alastair Stewart is an equities analyst and consultant