3rd July 2025 | Mike Jenkins | Commercial Property, Land Banking, Regeneration Ac t2023

With the Government’s technical consultation on implementing measures to improve build out transparency closing on 7 July, now is an opportune moment to examine the controversial issue of land banking.

Land banking — the practice of holding land with no immediate intention to develop it — has long been a contentious issue in the UK property sector. With growing public concern over housing shortages, urban sprawl, and stagnating infrastructure, the government has responded with sweeping reforms aimed at tackling land banking head-on. This blog explores key legal updates recently introduced and forthcoming, and their potential impact on commercial property developers and portfolio managers.

New and Upcoming Measures to Combat Land Banking

Community Infrastructure Levy (CIL) Reforms

The Community Infrastructure Levy (CIL) was originally introduced to ensure that new developments contribute to the cost of local infrastructure. Traditionally, CIL charges have been based on a fixed rate per square metre of new development. However, the system has faced criticism for its complexity, rigidity, and limited effectiveness in deterring land hoarding.

Recent shifts aim to make CIL more adaptable and locally responsive. Many local authorities now exercise discretion in setting differential rates based on the scale, type, and location of development. Some councils are also exploring the use of clawback-style mechanisms through planning obligations (e.g. Section 106 agreements), requiring additional payments if development milestones are not met within specified timelines. While these approaches are not formalised nationally, they reflect a growing local policy trend to discourage long-term landholding without active development.

Mandatory Infrastructure Levy

The proposed Mandatory Infrastructure Levy (IL) is set to replace much of the existing CIL and Section 106 systems. It is designed to address perceived loopholes that have allowed developers to negotiate down their obligations. Key features include:

  • Charges based on Gross Development Value (GDV): Unlike CIL, which is calculated on floorspace, the IL is tied to the end value of development, directly linking infrastructure contributions to market success.
  • Payments due at completion: Levy payments are typically deferred until development is complete, reducing the incentive to delay after gaining planning permission.
  • Affordable housing incorporated: Affordable housing delivery will be managed through the levy, limiting developers’ ability to adjust obligations via viability assessments.

The Infrastructure Levy thus aims to make speculative landholding less attractive, promoting quicker and more reliable project delivery.

Planning System Reforms

The government’s wider planning reforms under the Levelling Up and Regeneration Act 2023 also seek to discourage land banking:

  • Faster decision-making: Local authorities are being encouraged and resourced to expedite planning decisions, closing off administrative delays as a justification for holding land inactive.
  • Enhanced compulsory purchase powers: Councils now have expanded powers to compulsorily acquire land that is not progressing, enabling them to bring stalled sites back into active use.
  • Development progress monitoring: Developers may be required to report regularly on delivery progress. Although details are emerging, these reporting requirements are designed to increase transparency and accountability.

Together, these reforms are shifting the landscape to favour active development over passive landholding.

Penalties and Legal Actions

The enforcement regime is also tightening:

  • Financial penalties may be imposed for non-compliance with agreed delivery schedules, particularly where obligations are secured via planning agreements.
  • Planning permissions may be subject to review, and in cases of clear non-delivery without cause, local authorities may seek to modify or revoke them — although this requires formal process and justification.
  • Local authority intervention: Councils may step in using new powers to acquire or facilitate development, although direct build-out by councils remains dependent on local capacity and funding.

These tools reflect a clear shift from the previously permissive approach to land inactivity.

Implications for Commercial Property Developers and Portfolio Managers

Increased Financial Risk

Holding undeveloped land for speculative purposes will carry more risk. The emerging Infrastructure Levy, potential clawbacks, and penalties increase long-term financial liabilities. Developers will need to factor these into early-stage planning and viability assessments.

Need for More Strategic Planning

To maintain land holdings without facing enforcement, developers must present credible, phased, and timely development strategies. Fast-track approvals, detailed delivery timelines, and clear end-use plans will become crucial to navigating this evolving landscape.

Portfolio managers may also need to reassess asset allocations — prioritising income-generating or actively developing sites over dormant land banks.

Opportunities for Agile Developers

Conversely, these reforms may create opportunities for nimble, delivery-focused developers. As passive landholders exit the market or are forced to sell, more development-ready sites could become available. Those who can quickly secure approvals, fund infrastructure, and build efficiently may thrive.

Moreover, improved infrastructure delivery via the levy could raise the quality and value of completed schemes, making commercial projects more attractive to investors and occupiers.

Conclusion

The government’s crackdown on land banking represents a fundamental shift in the UK property landscape. Through the introduction of the Infrastructure Levy, planning reforms, and enhanced enforcement powers, the legal framework now prioritises delivery over speculation.

For commercial property developers and portfolio managers, the message is clear: success will depend on speed, strategy, and the ability to deliver. Those who adapt early are best positioned to benefit from the changing rules of the game.

 

This article has been written by Trainee Solicitor, Mike Jenkins and has been fact checked by Chris Piggott, Senior Associate in Commercial Property. 

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