28 Nov 2017
For those of you eagerly awaiting an update to our previous Community Infrastructure Levy (CIL) blog, SIT and LIsTen, the Government has - as previously promised - provided its initial recommendations in response to the CIL review in the Autumn Budget. For those not in the above category (CIL anoraks are apparently a niche group), planning obligations and CIL remain a significant consideration in the viability and deliverability of development, and therefore the Government’s stated first Budget objective of supporting more housebuilding.
The independent CIL Group, led by Liz Peace, prepared their report ‘A New Approach to Developer Contributions’ in October 2016 and this was released in February 2017 alongside the Housing White Paper. The Group’s report provided a number of recommendations, with the overarching objective of simplifying the levy, a laudable and welcome aim, but not an easy proposition.
We identified five headlines from the Review report in our February 2017 blog. So to what extent does the Government propose to take these on board?
A ‘new approach’ of ‘Local Infrastructure Tariff’ (LIT), ‘Strategic Infrastructure Tariff’ (SIT) and s106
LIT is not mentioned but the ‘3 tier’ CIL and planning obligation regime is been pursued through the introduction of SIT.
LIT rates linked to house sale prices
CIL indexation is to be linked to house price inflation, rather than CIL rates themselves. Whilst indexation is important – as highlighted by the Wandsworth/ Peabody case – this proposal does not get to the nub of the issue.
The CIL Group’s report recommendation to simplify CIL rates themselves has seemingly not been progressed. In fact the Government appears to want to do the opposite, proposing to consult on charging authorities having greater opportunities to vary CIL rates based on land use changes, so as to ‘better reflect the uplift in value’ - for example, higher CIL rates could be charged for the development of agricultural land for new homes, than say the residential development of industrial land.
Mandatory LIT charged on new development with no reliefs and exemptions
Silence on this proposal, as it currently stands.
Small developments only pay LIT and larger/strategic development would be able to negotiate s106 obligations, s106 pooling restrictions removed and potential offset LIT against s106 obligations
Pooling restrictions are to be removed… but only in ‘certain circumstances’ such as in low viability areas, or where significant development is planned on several large sites. The Government claims this will avoid ‘unnecessary complexity’.
However, the absence of the potential to offset LIT against s106 obligation contributions is a major omission. The current disconnect between strategic developments and associated infrastructure delivery seems likely to continue. In recommending offsetting, the CIL Group noted:
A further benefit of the combined LIT/Section 106 approach will be that large developments will be able to address, through the Section 106, not only the funding of the infrastructure but also the delivery of the infrastructure, which has been one of the failings of CIL.
SIT contributing to identified infrastructure projects similar to the current Mayoral CIL
SIT is to be taken forward with consultation on whether this should be used by Combined Authorities and planning point committees to fund both strategic infrastructure (as the Mayoral CIL does for Crossrail in London), and local infrastructure too.
So where does this leave us? Still facing uncertainty arising from ongoing issues with the detailed and technical workings of CIL; more clarity is certainly anticipated when DCLG launches the proposed consultation on taking these headline measures forward – and we hope, further CIL amendments that resolve day-to-day problems inherent in the current rules.
The Government’s measures are seeking to make the CIL regime encapsulate opportunities for land value capture, as evidenced by the proposal for more variance in CIL rates and the commitment to speed up the process of setting and revising CIL. The latter also recognises that the current two stage consultation process and evidence base requirements can present a time and cost barrier to charging authorities putting CIL in place. This particular proposal is to be commended and anything that can make the levy more responsive should be welcomed.
However, those dealing with CIL ‘on the ground’ will no doubt recognise the need for the CIL Regulations themselves to be more transparent, simplified and useable. Introducing greater ‘flexibility’ in terms of CIL rates (and the more extensive evidence base needed to support this) should be alongside streamlining the Regulations and simplifying how they are applied to development projects – a very difficult balance.
So CIL is here to stay for now and we await the consultation…
10 Feb 2017
CIL + s106 → LIT + SIT + s106 = fairer, faster, more certain and transparent?
No, I’m not revisiting my maths A-level (fortunately), but we planners love an acronym or two and the above summarises what the Government’s ‘CIL Review’ Group considers will best deliver the original objectives for CIL the community infrastructure levy.
This week’s publication of the Housing White Paper has quite rightly grabbed the headlines, with housing delivery, or the lack of, being the pre-eminent planning issue of the day. However, a number of other related publications were released on Tuesday, including ‘A New Approach to Developer Contributions: A Report by the CIL Review Group’, originally submitted to the Government in October last year.
The Group, led by Liz Peace, has produced a well-structured and readable report, a welcome relief from the much-amended CIL Regulations themselves… Ahead of its publication, we previously considered what might be within the review - below are five headlines from the Report itself:
The ‘new approach’ referred to in the document’s title is the recommended replacement of the current CIL and s106 regime with: a standardised ‘Local Infrastructure Tariff’ (LIT) for all development; a ‘Strategic Infrastructure Tariff’ (SIT) for combined authorities; and s106 for larger/strategic developments
The potential methodology for the LIT rate is a charge of between 1.75 and 2.5% of the sale price for a standardised 100sqm three bedroom family home, divided by 100 to reach a square metre rate. This would be applied to all residential development, with other uses charged at a percentage of up to, but not above, the residential figure. The report notes that “this methodology is fairly crude but what it lacks in sophistication it makes up for in simplicity and the avoidance of bureaucracy”
The mandatory LIT would be charged on the gross area of new development with no reliefs and exemptions, so out would go the offsets for existing buildings and affordable housing under the current CIL Regulations. Changes of use and development using permitted development rights would also pay
Small developments (e.g. residential schemes under 10 units) would only pay the LIT and larger/strategic development would be able to negotiate s106 obligations to better relate infrastructure delivery to development. Current s106 pooling restrictions would also be removed. Importantly, it is recommended that local authorities would be given flexibility to offset the LIT against s106 obligations
The SIT would be similar to the current Mayoral CIL, pooling money for a small number of identified infrastructure projects
So let’s see how much of this is taken forward by the Government (we have to wait for the Autumn Budget to hear its response and find out what actions, if any, are to be taken to change the CIL and s106 regimes). In the meantime, I will have to return to that maths A-level after all, to continue to navigate my way through the existing CIL Regulation 40.