The Planning Act 2008 provides the framework for a discretionary planning charge known as the Community Infrastructure Levy (CIL), the detail of which is set out in the Community Infrastructure Levy Regulations 2010 (CIL Regulations).
April will bring about two important milestones in the CIL regime:
- amendments to the CIL Regulations will extend the existing social housing relief from the CIL to cover a wider range of dwellings that are rented below market rate.
- The pooling of more than 5 contributions which provide for the funding or provision of a particular project, or provide for the funding or provision of a particular type of infrastructure, will be restricted. This is backdated to include all obligations which have been entered into since the 6 April 2010.
Social Housing relief
The CIL Regulations provide for relief from liability to the CIL where a dwelling satisfies at least one of four conditions (regulation 49). They also provide for liability to repay an amount of the CIL where social housing relief is withdrawn before the end of the "clawback period" (regulation 53).
The Community Infrastructure Levy (Amendment) Regulations 2015 (Amendment Regulations) were made on 20 March and come into force on 1 April 2015.
These amendment regulations insert a new (fifth) condition for dwellings that are let by landlords who are not a local housing authority, registered provider of social housing (in England) or social landlord (in Wales). To satisfy the condition the dwelling must be let at no more than 80per cent of market rent (including service charges), to tenants whose needs are not adequately served by the commercial housing market. A planning obligation under section 106 TCPA 1990, to ensure compliance, must have been entered into in respect of the planning permission which permits the chargeable development.
Where social housing relief granted under this new fifth condition is withdrawn before the end of the seven year "clawback" period (which runs from the date on which the dwelling is first let), a person who has benefitted from the relief may be liable to repay the withdrawn amount with interest calculated from the day on which the chargeable development commenced.
The amendment regulations also update the CIL Regulations to refer to updated Rent Standard Guidance published by the Regulator of Social Housing in January 2015.
This amendment of the CIL regulations will benefit those bodies that develop affordable properties to be rented at 20 per cent below the market rate to those whose needs are not adequately met by the commercial housing market.
Note that a change to the Planning Practice Guidance was made on 24 March 2015. This provides that when charging authorities seek early engagement when preparing their charging schedules they should consider consulting with Business Improvement Districts in the area covered by the levy proposals.
The impact of failing to have a Charging Schedule in place by 6 April 2015
In their recent report on 'CIL: The Countdown to 2015', Savills report that only 12per cent of planning authorities have charging schedules in place and 68per cent are unlikely to do so before the April date. There is no statutory obligation for local authorities to charge CIL, but the impacts of an authority not having implemented CIL by the deadline are likely to be felt by both authorities and developers.
Those Authorities that have a Charging Schedule in place
The CIL Regulations provide that from the date on which an authority implements a regime to charge CIL the authority is prevented from double charging a developer by also seeking contributions under planning obligations. From the date on which the first charging schedule takes effect, the authority may not rely on a planning obligation as a reason for the grant of planning permission where that obligation provides for the funding or provision of an infrastructure project on the local authority’s infrastructure list (the "Regulation 123 List"). Even if it is not on the Regulation 123 List, the charging authority may not rely on that obligation as a reason for granting planning permission if it has, since 6 April 2010, entered into five or more separate planning obligations (relating to planning permissions granted for development in its area) which also provide for the funding or provision of a particular infrastructure project or a particular type of infrastructure(unless it is provision for something which could never be secured by CIL receipts e.g. restrictions on affordable housing).
Authorities without a Charging Schedule on 6 April 2015
Authorities without a charging schedule in place on 6 April 2015 will see the impact of the pooling restriction coming into force nationally. From 6 April 2015 planning obligations can only constitute a reason for granting planning permission where the restriction on pooling contributions is met. This requires that money being pooled to contribute to a particular piece or type of infrastructure comes from no more than five planning obligations (entered into since 6 April 2010).
Very few authorities are likely to have actually tracked back to work out precisely how many planning obligations they have imposed in relation to any given piece of infrastructure (or infrastructure type) going back to 6 April 2010.
Ascertaining the number of planning obligations already entered into is made more difficult by the fact that the pooling restriction applies not only to funding or provision of a project but also a "type of infrastructure". The Planning Practice Guidance (June 2014) states that the effect of CIL is to restrict the use of generic section 106 tariffs. The risk that the CIL Regulations may be infringed are likely to be higher where authorities have referred to generic types of infrastructure (e.g. an unspecific contribution towards education in the local area) rather than identified specific infrastructure projects, in their planning obligations.
Where authorities are looking to continue to gather up monies after 6 April 2015 from up to five planning obligations it may be prudent for them to define contributions narrowly to maximise the ability to pool, if that is required. Those authorities that are still wrestling with the prospect of introducing their own charging schedules may want to consider making their Regulation 123 Lists specific to reduce the prospect of double charging (although the pooling restriction would still apply).
A note on Highway Agreements
Amendment of the CIL Regulations in 2014 provided that no condition may be imposed on the grant of planning permission that requires a section 278 agreement, for the funding or provision of infrastructure which would be provided by a Council's CIL receipts. Also no condition may be imposed that prevents or restricts the carrying out of development until a highway agreement has been entered into for the funding or provision of infrastructure which would be provided by a Council's CIL receipts. These provisions apply from the date that an authority's first charging schedule takes effect. Note however that the restriction will not apply to trunk roads (agreements with the Secretary of State) or GLA roads (Agreements with Transport for London).
The 2014 reforms were introduced to close an identified 'loophole' and to ensure that section 278 agreements are not used to fund highway infrastructure that is intended to be financed by CIL receipts.
However, it is also worth noting that the pooling restriction which will apply to planning obligations does not apply to highway agreements.
CIL is a complex area. The extended application of the pooling restriction and the uncertainty of how this will work in practice is an issue many have yet to fully consider, despite the change coming into force in a matter of days.
The intention was always to encourage authorities to adopt a CIL charging schedule for the funding of infrastructure. The forthcoming change is likely to prove a powerful incentive for authorities, who may otherwise face the prospect of an infrastructure funding gap.
For those local authorities who have yet to introduce a charging schedule, all interested parties should in the immediate few days be focussing their efforts on completing any outstanding planning obligations in order to avoid the difficulties presented by the inevitable uncertainty that will arise once the pooling restriction comes into force. Going forward, parties to planning obligations securing contributions to infrastructure should ensure that drafting is as specific as possible, and should check whether entering into the obligation will breach the pooling restriction. If it does, other options for securing the infrastructure may need to be considered.