The legal framework for community led housing

There is no legal definition of Community-Led Housing. The definition agreed within the CLH sector is:

  • A requirement that meaningful community engagement and consent occurs throughout the process. The community does not necessarily have to initiate and manage the development process, or build the homes themselves, though some may do
  • The local community group or organisation owns, manages or stewards the homes and in a manner of their choosing
  • A requirement that the benefits to the local area and/or specified community must be clearly defined and legally protected in perpetuity e.g. through an asset lock

There is a legal definition of what constitutes a Community Land Trust, set out in section 79 of the Housing and Regeneration Act 2008, as follows:

  1. In subsection (1)(d) “community land trust” means a body corporate which satisfies the conditions below
  2. In those conditions “local community” means the individuals who live or work, or want to live or work, in a specified area
  3. Condition 1 is that the body is established for the express purpose of furthering the social, economic and environmental interests of a local community by acquiring and managing land and other assets in order—
    • to provide a benefit to the local community, and
    • to ensure that the assets are not sold or developed except in a manner which the trust's members think benefits the local community
  4. Condition 2 is that the body is established under arrangements which are expressly designed to ensure that—
    • any profits from its activities will be used to benefit the local community (otherwise than by being paid directly to members),
    • individuals who live or work in the specified area have the opportunity to become members of the trust (whether or not others can also become members), and
    • the members of the trust control it.

Local authority powers to engage in CLH

The main legal powers that local authorities may need to use when engaging in CLH are:

  • the General Power of Competence
  • (where relevant) the Power to Trade
  • the Power to Invest; and
  • the Power to Borrow 

The Power to Dispose of Land and Assets is considered in more detail in Section 3.4 of the Toolkit.

The General Power of Competence

  • The General Power of Competence (under sections 1 to 4 of the Localism Act 2011) empowers a Council to do anything that an individual with full capacity may do, and to do anything so enabled for a commercial purpose
  • The General Power of Competence can be used even if there is another power that overlaps with it, but is limited by any limitations on the powers of the council that existed prior to it coming into force and by any new limitations that are stated to apply specifically to the General Power of Competence or to all of the council’s powers (unless the General Power of Competence is specifically excluded)
  • The General Power of Competence and the Trading Power (see below) overlap and, as a result, any restrictions on the use of the Trading Power will apply to use of the General Power of Competence when acting for commercial purposes (see below for more detail on the Trading Power)
  • A Council cannot do something for commercial purposes that it has a duty to do, but this does not restrict activities where there is no statutory duty to act
  • When exercising the General Power of Competence in acting for a commercial purpose the council must do through a company (within the meaning of the Companies Act 2006) or a registered society under the Co-operative and Community Benefit Societies Act 2014
  • The use of the General Power of Competence can be restricted by the Secretary of State but to date no restrictions relevant to CLH have been put in place

The Trading Power

  • The power to trade under section 95, Local Government Act 2003 and the Local Government (Best Value Authorities) (Power to Trade) (England) Order 2009/2393 authorise the council to do for a commercial purpose anything that it is authorised elsewhere to do.  The Trading Power cannot be used to do something that the council is under a duty to do in relation to any person.  The council must establish a company through which to trade when exercising the Trading Power
  • The 2009 Order requires the council to prepare a business case to support the use of the Trading Power and the business case must be approved by the council.  The council is also placed under an obligation to recover any support costs from the company it sets up

The Investment Power

  • The Investment Power (under section 12 of the LGA 2003 and / or section 111 of the Local Government Act 1972) enables the council to invest for any purpose relevant to any of its functions or for the purposes of the prudent management of its financial affairs.  The Incidental Power authorises the council “to do anything (whether or not involving the expenditure, borrowing or lending of money or the acquisition or disposal of any property or rights) which is calculated to facilitate, or is conducive or incidental to, the discharge of any of its functions

The Borrowing Power

  • A council also has a power to borrow under section 1 of the Local Government Act 2003. This is worded similarly to the Investment Power, and enables a council to borrow “for any purpose relevant to its functions under any enactment, or for the purposes of the prudent management of its financial affairs”.  The council must determine for itself how much it can afford to borrow (and stay within those determined limits) but, in making that determination, the council must have regard to the Prudential Code for Capital Finance in Local Authorities published by the Chartered Institute of Public Finance and Accountancy
  • More generally, a council must apply the Prudential Code when exercising either the Borrowing Power or the Investment Power.  The newest version of the Prudential Code is expected to be available at the start of 2018, and councils should consider the use of the Borrowing and Investment Powers in the context of that Prudential Code once released.  This new Code is intended to reflect the increasing commercialisation of local authorities, and to recognise that risk management and investment activity in the treasury function have evolved considerably in recent years

Relevant legal issues for CLH schemes

There are a number of legal and/or statutory provisions which councils should be aware of when considering CLH and how this can be supported and implemented, as highlighted throughout the toolkit.

These cover the relevant statutory or general legal provisions which will prove helpful in the promotion and delivery of CLH schemes, particularly:

Local authorities and housing associations are encouraged to review relevant sections of the Toolkit, including the template documentation and associated regulatory guidance referred to, to deal with any particular issues or concerns which may arise.

Localism Act 2011

Further helpful legal provisions can also be found in the Localism Act 2011 (and associated Regulations and updated legislation), which include the Community Right to Bid, Community Right to Challenge and Community Right to Build.

The Community Right to Bid provides a mechanism by which communities have the right to bid for and buy local land that is considered to have community value, that is, an ACV (Asset of Community Value)

  • This essentially provides a moratorium period during which a community interest group has a right to bid for land that is listed as an ACV. It is important to note however the right to bid provisions do not give anyone right of first refusal of an ACV including community groups, or restrict to whom an owner of an ACV can sell their land to, or at what price
  • An ACV is land or buildings in a local authority's area that the local authority considers to have community value on the basis that either:
  • the primary current use of the land furthers the social well-being or social interests of the local community and it is realistic to think that the land can continue to be used in a way that will further the social well-being or social interests of the local community (whether or not that was the case previously); or
  • the land has previously been used for the purposes of furthering the social well-being or interests of the local community in the "recent past" and it is realistic to think that it will be used for the same purpose again within the next five years
  • Not all land can be deemed an ACV and so local authorities should ensure that they aware of the restrictions here e.g. land that is a residence or connected to a residence cannot be listed as ACV
  • Every local authority is required to maintain (adding, amending and removing entries as soon as reasonably practicable after receiving the information enabling it to make the changes) two lists in relation to ACV in its area:
  • a list of land in its area that is land of community value (the ACV list); and
  • a list of land unsuccessfully nominated for inclusion on the ACV list
  • Both these lists must be available for free inspection and a local authority must provide a free copy of the lists if requested to do so
  • A community nomination can also be made for land to be added to the ACV register by either a parish council (in England, or a community council in Wales) in respect of land within the council's area, or a person on behalf of a voluntary or community body with a local connection with land in the local authority's area (including a parish council in respect of land outside the council's area). The council must then consider the nomination within the prescribed timescales and keep the parties informed; adding the ACV to the relevant list once a decision has been taken
  • As and when the ACV is to be disposed of, the required process must be followed and the register updated and parties notified accordingly providing the community interest group with the opportunity to bid for the ACV land in question.

The Government has published non-statutory guidance on the Right to Bid for an Asset of Community Value in England.

The Community Right to Challenge was also introduced under the Localism Act as part of the Government's drive to decentralise public services and to give communities the opportunity to deliver them.

  • This Right provides certain relevant bodies to challenge a relevant authority by expressing an interest in running a relevant service and when such a challenge is made and accepted by the relevant authority, this will trigger a procurement process
  • This process must comply with any applicable public procurement requirements. A relevant body will then be able to bid to provide the relevant services alongside any other bidders (including, potentially, an in-house department of the relevant authority).
  • There are prescribed processes and exempt services for which a CRC cannot be accepted.

For further information on the Community Right to Challenge see the statutory guidance.

The Community Right to Build also arose out of the Localism Act.

  • An order under the Community Right to Build is a particular type of Neighbourhood Development Order (‘NDO’), providing for community-led site-specific development; an NDO being a development order that deems planning permission to have been granted for specific development or specified classes of development within all or part of a neighbourhood area
  • The Community Right to Build sets out to empower local people to propose a development in their area and to obtain permission for it, without having to go through the usual planning process
  • The Community Right to Build can be used to approve the building of homes (new-build or conversion of existing buildings), shops, businesses, affordable housing for rent or sale, community facilities or playgrounds. It is up to the community to decide the type, quantity and design of properties for the development. It is also worth noting that a proposal can be developed as part of a full Neighbourhood Plan or on its own
  • There is a defined procedure for taking forward a Community Right to Build Order of which a council should be aware e.g. legally constituted organisation, proposing a scheme within a defined area that has the support of the local community
  • The Town and Country Planning Act 1990 sets out the powers community organisations have to apply for these orders and it is also worth noting that there is provision for the exemption from leasehold enfranchisement for organisations using the Community Right to Build which seeks to protect CLH assets for community use for the long term (see note 5J for further information)

Further information on the Community Right to Build is available from Locality, through the My Community website.


Last updated in April 2018