Innovative proposals in housing White Paper to "make land available in the right places" offer potential opportunities to local authorities

Wednesday, 8th March 2017

On 7 February 2017, the government published the White Paper "Fixing our broken housing market" (the "White Paper"). A really exciting proposal involves the introduction of a form of "land pooling" that derives from Germany, which would make more land available for new development, primarily for small and medium sized sites in rural communities. Such a policy will involve extensive collaboration between the local authority, local landowners and contractors.

The German model

The German model is a legally binding process of "land pooling" or "readjustment" known as Umlegung. The White Paper focuses on a case study in the German city of Bonn as a typical example of the model of land for housing delivery pooling the government wishes to see introduced in the UK.

A 25 hectare site was assembled to build three hundred homes with local infrastructure out of formerly low grade agricultural land owned by eighty different landowners, including the local council ("the Council"). After a local consultation and negotiations with the landowners, the Council used land pooling to plan an urban extension and provide local housing.

This involved the Council assembling all land ownerships and creating a masterplan, obtaining outline planning permission and using local contractors to create serviced plots ready for housing development.

Each landowner then received one or more of the one hundred and eighty-six building plots according to their share of either the original land value or land area, minus public administration and infrastructure costs. As the Council was also a landowner in the area, it was able to deliver fifty-two council owned plots for family housing and apartments, some of which it then sold at reduced prices to younger families and first time buyers in the local area. Others were sold directly to local builders for the construction of apartments according to local specifications.

The Council in Bonn has used the process many times to bring forward new housing, and typically has two or three different areas being assembled at any one time. This is not uncommon for many larger councils in Germany.  

Implications for State aid and procurement

As this scheme is used throughout Germany, a jurisdiction subject to EU State aid law, presumably it is capable of being compatible. However, as it involves state resources being used to favour certain undertakings, if local authorities wish to initiate schemes of this nature they may need to consider the State aid implications.

The recruitment of contractors by the local authority to develop such sites will also need to be subject to procurement processes. Collaborations of this kind between the local authority, multiple landowners and contractors will be an entirely new kind of delivery structure for infrastructure and housing in the UK. For such schemes to operate within the law, an overall structural framework will need to be put in place having particular regard for the local authority's governance and vires.

The details in the White Paper on how this scheme will operate in the UK are limited. The White Paper simply sets out the Bonn case study with the proposal that this model be adopted in the UK, and asks for views from local authorities and others on the opportunities it presents prior to making more detailed proposals.

If adopted it appears that this approach could be hugely beneficial to local authorities pressed to deliver a five year housing supply, particularly rural authorities constrained by Green Belt limitations. Land pooling could allow the use of land with complex ownership to deliver housing, whilst avoiding the expense of the often protracted and controversial Compulsory Purchase Order process.

Key Contact

Elizabeth Gibson

Partner and Head of Public Sector

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+44 (0)1392 333802


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