12 Sep 2016
With Parliament's return this month, a publication that many in the property industry are waiting for with keen interest is the report of the Panel reviewing the current community infrastructure levy (CIL) regime.The Panel, led by former British Property Federation (BPF) Chair Liz Peace, was charged at the end of last year with assessing the extent to which CIL is working effectively (or not), and with recommending changes that would improve its operation.So what drove Government to undertake this review, and what might the implications of it be for the future of CIL?
Is CIL too complicated and overly burdensome?
When CIL was introduced back in April 2010, it aimed to provide a faster, fairer, more certain and transparent means of collecting developer contributions to infrastructure than individually-negotiated Section 106 planning obligations.
The principle behind CIL is on the face of it simple enough; it seeks to capture the value uplift gained from a planning permission, to reinvest that uplift in infrastructure that benefits the wider community. CIL is chargeable on more developments than would be the case with section 106 obligations alone, with a charging schedule setting out the amount per sq. m. that has to be paid. In theory then, the level of payment required on commencement of development is known from the outset: developers therefore were supposed to have more certainty for budgeting and collecting authorities more money for funding infrastructure.Translating this concept into workable regulations has however proved to be highly challenging; 6 years down the line and with amendments to the CIL regulations every year but one since the levy came into force, the Government has undertaken this review (back in 2010, a commitment was made to a CIL review 5 years in). We can rest assured that the Panel’s recommendations are highly likely to lead to still more legislative changes (and possibly, more wide-reaching reform), when the review report is launched this autumn.Current BPF Chief Executive Melanie Leech has described how many of the Group's members cite CIL as "one of the biggest bugbears of the planning system". Working with CIL on a day to day basis, Leech’s comment is probably all too kind, and I have certainly heard more choice words used to describe it.Key areas of criticism are: the limited ability to influence the outcome of CIL rates in charging schedules; the lack of workability of CIL on more complicated, phased schemes and projects that have to be changed both prior to and after construction starts; a range of challenges in calculating CIL and when/ how existing floorspace in a range of uses can be offset (i.e. issues around the building being ‘in use’); and generally, a lack of flexibility particularly for the unique and varied viability issues affecting different sites and different uses.CIL has also created new challenges in negotiating Section 106 obligations in the post-CIL world (e.g. with regard to pooling restrictions). Furthermore there has also been much lower uptake by local authorities and less infrastructure funding raised from the levy (with the exception of London’s Mayoral CIL) than originally anticipated.
A more certain and simpler future?
So how far will the Panel go in their review? Ahead of the awaited review outcome, here are NLP’s CIL team’s speculations for the areas of law where changes are likely to be made:
Simplified Regulations and national Planning Practice Guidance to accompany them
The removal of the Regulation 123 infrastructure list and section 106 pooling restrictions i.e. councils would be able to negotiate with applicants and communities where receipts will be spent
Strategic sites would not be liable to CIL, or if they were to be, the liability would be a low rate per sq. m.
CIL (possibly to be renamed?) would be a charge on all development
There would be no ‘other’ charges (via section 106) for small and medium sites but major developments would be liable to CIL and section 106 payments
Ideally, there would be a clear integration of CIL and section 106 with a review of the local plan-making process (pursuant to the Local Plans Expert Group’s work)
There would be scope for charging authorities to borrow against forecast CIL receipts
There would be a prescribed method of CIL calculation, with any ‘indexing’ potentially linked to the Retail Price Index or any other freely available, reputable Index
Greater recognition of combined governance and how this could assist in funding large scale infrastructure projects (such as the Mayoral CIL is doing for Crossrail)
So what are your predictions for CIL? Will any or all of these possible changes to the current regime create a simpler more workable system?If you need help with CIL, NLP’s ‘FaCILitate’ service helps clients understand the current CIL regime, in terms of project liability issues, including calculating and paying the levy. You can read more about how FaCILitate might be able to assist your development project here.
Image credit: David Hawgood