Compulsory Purchase and Eminent Domain

Overview

Compulsory purchase (the term used in the United Kingdom and much of the Commonwealth) and eminent domain (the US term) is the power of the state to acquire privately held land or property for a public purpose, subject to the payment of compensation. In England and Wales the modern framework rests on the Compulsory Purchase Act 1965 and the Land Compensation Act 1961, which together set out the process for compulsory purchase orders (CPOs) and the basis on which compensation is assessed.[1] The central and contested question is how compensation should be valued: the "equivalence" principle aims to leave the former owner neither better nor worse off, typically by paying the land's open-market value — which can include hope value, the uplift in price reflecting the prospect of future planning permission or development, even where none currently exists.[1]

Because compensation is usually set close to open-market (including hope-value) rather than existing-use value — the value of the land in its current, unimproved use — compulsory purchase functions poorly as a tool for public land value capture: the state ends up paying landowners for speculative value that public infrastructure or planning decisions themselves helped create. Ryan-Collins, Lloyd and Macfarlane's Rethinking the Economics of Land and Housing argues for strengthening compulsory purchase powers so that acquisition can occur closer to existing-use value, making it a more effective complement to betterment levy-style value capture.[2] The UK's Levelling-up and Regeneration Act 2023 moved partway in this direction, giving certain public authorities a new power to direct that hope value be excluded from compensation for compulsory purchase orders tied to housing, education, or NHS developments.[1]

See Also

• Land Value Capture — the broader family of instruments to which reformed compulsory purchase belongs
• Betterment Levy — the event-based charge on land value uplift that compulsory-purchase reform is meant to complement
• Community Land Trust — an ownership model often paired with compulsory-purchase-based land assembly
• Ryan-Collins, Lloyd & Macfarlane, Rethinking the Economics of Land and Housing — the discovery source proposing stronger existing-use-value compulsory purchase powers

Sources

1. UK Parliament, House of Commons Library, "Compensation for the compulsory purchase of land" — commonslibrary.parliament.uk — used for the equivalence principle, the role of hope value in compensation, and the Levelling-up and Regeneration Act 2023 power to exclude hope value for housing/education/NHS-related CPOs.
2. Josh Ryan-Collins, Toby Lloyd and Laurie Macfarlane, Rethinking the Economics of Land and Housing (Zed Books, 2017), Ch. 7 §7.2/§7.5 (policy recommendation "strengthen compulsory purchase powers at existing use values") and Ch. 2 §2.6 (compulsory purchase as a UK land-value-capture tool) — see the wiki's book summary.