UK prime minister Theresa May’s housing adviser has been accused of not going far enough to reform the price at which councils buy agricultural land in order to make housebuilding more affordable. Oliver Letwin, a former cabinet minister, issued a government-commissioned report alongside last week’s Budget that examined the issue of so-called “buildout rates” in the housebuilding industry. It recommended tougher requirements for developers on large sites so they have to build a wider mixture of housing types for sale and rent. But many figures in the housing industry had expected Sir Oliver to recommend a shake-up of the 1961 Land Compensation Act — a move that could have made it much cheaper for local authorities to build homes. The obscure legislation has a huge impact on the property market because it means that councils cannot buy agricultural land for development at its current value. Instead they must buy it at speculative “hope” values calculated as if there was already planning permission to build on the site. That can make the land more than 100 times more expensive than its original value. Hugh Ellis, interim chief executive at the Town and Country Planning Association, said the review failed to tackle the “craziness” of the current system. Recommended Property sector Unloved shopping centres make way for homes in landlords’ plans “If local authorities are going to take a leading role in the development of land, they need to get it at the right price, and the compensation code [currently] allows for the craziness of giving landowners hope value — value that they don’t own, didn’t create and doesn’t actually exist,” Mr Ellis said. “We are disappointed that he failed to deal with one of the key barriers to allowing them to take that role.” One industry figure said he had previously heard that the recommendation would be in the report: “I wonder who got to them?” he asked. Sir Oliver insisted he had tackled the issue, telling the FT his guidance to local authorities would mean councils could compulsorily purchase large plots of land at no more than 10 times its agricultural value. The report says: “I recommend that the housing secretary . . . should guide local planning authorities towards insisting on levels of diversity that will tend to cap residual land values for these large sites at around 10 times their existing use value.” That could result in values of about £100,000 per acre of farmland, against around £1.9m per acre for the market value of a typical site in south-east England. Some Tory MPs and landowners are understood to have expressed concerns about the idea. The British Property Federation said Sir Oliver had come to the right conclusion: “The idea that the public sector should be able to buy land at close to existing use value, could choke off land supply,” the industry group said. But other housing groups described the Letwin proposal as “insufficient”, because it still allowed landowners to make huge profits on the sale of their fields. Greg Beales, campaign director at the charity Shelter, said: “Sir Oliver Letwin has put his finger precisely on the problem: that the high cost of land is stopping us from building enough homes. “But we should be clear that the recommendations in this report simply will not work because the incentives for landowners to sell up at lower values are nowhere near strong enough.” A spokesman for James Brokenshire, the housing secretary, said the report was authored by “Sir Oliver alone” and he was not pressured to include or leave out any recommendations.