Posted on November 14, 2018

Housing Delivery through Developer Contributions

In parallel with the Budget the Government released its response to the March 2018 Supporting Housing Delivery through Developer Contributions consultation.

The paper provides a summary of consultation responses and the Government’s view on the way forward.  We summarise this here:

The Foreword references the revised NPPF and PPG. This new approach ensures that local plans clearly set out the contributions that developers are expected to make towards infrastructure and affordable housing; introduces a standard approach to establishing land value; and increases transparency and accountability through the publication of viability assessments and through improvements to the monitoring and reporting of section 106 planning obligations.

In addition to the changes in the NPPF/PPG, Government plans to build on those improvements by introducing legislative reforms to developer contributions.  The reforms aim to provide clarity and certainty to developers around the contributions they are expected to make.

Aligning the evidence for Community Infrastructure Levy charging schedules and plan making

There is a need to improve guidance to help local planning authorities align their evidence base for CIL-setting purposes and plan making. This could include more clarity on the level of detail to be included about infrastructure requirements and more clarity on the level of information needed to justify the introduction of the Levy.  This would be achieved through changes to the guidance [PPG].

We have long advocated setting CIL and other contributions (mainly affordable housing) at the same time.  This allows for a consistent evidence base in terms of market value areas and enables consideration of affordable housing and other infrastructure at the same time.  Noting that there is not a ‘bottomless-pit’ of development surplus for both.

Ensuring that consultation is proportionate

There was recognition that the current CIL process of two rounds of consultation is onerous and could be reduced to one round of consultation, particularly in instances where the charging schedule is being reviewed. However, there is a need to ensure that a statutory requirement for consultation is retained in order to support opportunity to review viability evidence.  The Government intends to take forward a modified proposal to ensure that regulations continue to require charging authorities to consult on draft charging schedules, whilst removing the current statutory requirement for two separate rounds of consultation in every circumstance. This will ensure that Charging Authorities can decide the most proportionate approach.

If Authorities align the plan making process with the CIL charging process this could help to streamline the consultation.

 Removing unnecessary barriers: the pooling restriction

Government consulted in March 2018 on the proposal to allow local authorities to pool section 106 planning obligations either (i.) where it would not be feasible for the authority to adopt the Community Infrastructure Levy in addition to securing the necessary developer contributions through section 106, or (ii.) where significant development is planned on several large strategic sites?

It was determined that this results in further complex bureaucracy.  Fortunately Government has listened and recognises that there is broad support for removing the pooling restriction in all areas.

The Government accepts the argument that lifting the pooling restriction in all areas would remove barriers to development, and could in some circumstances give local planning authorities the ability to secure more funding through S106 to deliver the infrastructure needed to support development. Nevertheless, it remains the Government’s intention that the Community Infrastructure Levy should be used to secure contributions to address the cumulative impact of development in an area, and that the uptake and use of the Levy should be incentivised.

Therefore, the Government has decided to take forward a modified proposal and intends to lift the pooling restriction in all areas. So that the Community Infrastructure Levy remains an effective mechanism for collecting contributions towards addressing the cumulative impact of development, the Government will ensure measures are in place to incentivise uptake and continued use of the Levy – it is not clear what such incentives are, but see below regarding SIT.

Increasing market responsiveness

Government consulted in March 2018 to allow local authorities to set differential CIL rates based on the existing use of land. 

The consultation raised significant concerns about the complexity involved in implementing CIL for all the various existing uses e.g. offices, industrial, retail etc. which would create delay and increase costs. Particular concerns included the additional complexity of calculating Levy liabilities and the need for additional evidence. At consultation events, while local authorities were broadly in favour of the principle of setting charging schedules with reference to the existing use of land, there was widespread concern that operational complexity would prevent take–up.

AspinallVerdi has a simpler approach which is that CIL and Affordable Housing should be differentiated by reference to greenfield and brownfield (previously developed land) sites.  This is because the economics of brownfield land (including: higher EUV of land; costs of demolition, site clearance and remediation; greater contingencies for risk etc) mean that the development surplus for S106/CIL is much lower than a greenfield context.  Enabling Authorities to differentiate by greenfield and brownfield typologies would ensure that Authorities maximise the receipts from greenfield sites whilst not stymieing brownfield regeneration.

In this respect the Government has reviewed this proposal and considers there are existing flexibilities in the Community Infrastructure Levy Regulations that, through the use of differential Levy rates, will allow local authorities to go some way towards achieving the objective of the proposed reform. The Government therefore proposes to make changes to guidance to support local authorities to set differential rates more effectively. 

We welcome these changes and urge that they make it clear that Authorities can differentiate both CIL and Affordable Housing targets by greenfield and brownfield land.

Improving transparency and increasing accountability

There were concerns that the removal of the Regulation 123 list would result in ‘double dipping’ (where developers are charged twice through section 106 planning obligations and Community Infrastructure Levy receipts for the same infrastructure spending).  However, this is in the context of the new Infrastructure Funding Statement which is to improve transparency around developer contributions.

Government proposes to remove the restrictions which currently prevent section 106 planning obligations being used to collect contributions towards infrastructure included on a Charging Authority’s ‘regulation 123 list’. New reporting standards, which are set out in the Infrastructure Funding Statement, will address concerns about double dipping by ensuring that there is transparency over how developer contributions from both CIL and section 106 planning obligations are being used, rather than by placing formal restrictions in regulations.

A Strategic Infrastructure Tariff

Consultees argued that the Strategic Infrastructure Tariff should be made available to other groups of local authorities working together to produce joint plans and not just restricted to Combined Authorities and joint planning committees.

In this respect the Government has decided to take forward a modified proposal, to enable Combined Authorities with strategic planning powers to take forward a Strategic Infrastructure Tariff, and to encourage groups of charging authorities to use existing powers to more effectively support the delivery of strategic infrastructure through the pooling of their local Community Infrastructure Levy receipts.

This is probably a satisfactory solution.  This is one area which can be used to incentivise devolution and metro-mayors.  We advocate that SIT should only be available as a mechanism to raise funding where there is appropriate democratic accountability e.g. elected city region mayors.  This devolution of strategic planning powers should encourage greater uptake of city region mayors.

Developer Contributions Government Response October 2018