It is anticipated that the Planning Bill will complete its passage through Parliament imminently. The Bill promotes the new Community Infrastructure Levy (CIL) for England and Wales and regulations for the implementation of the CIL are expected to follow in Spring next year. The Department for Communities and Local Government's report, issued last month, outlines the proposals for the new charge. It indicates that the representative bodies for the development industry agree with the proposed skeletal legislation with regulations setting out the detail, on the basis that the rules may evolve over time. It is less clear however that the development industry welcomes the CIL at all. On the one hand, the present system is unclear and causes delays in development. On the other hand, the lack of certainty of what the CIL will involve is causing concern.
The current position
In general terms, planning permission is granted for development if it accords with the relevant development plan unless material considerations indicate otherwise. It is possible to make what would otherwise be an unacceptable development proposal acceptable by attaching conditions to the planning permission granted and/or negotiating a Section 106 Agreement. The Section 106 Agreement often involves a payment by the developer towards infrastructure required as a result of a proposed development. The negotiations are carried out by the developer, the landowner and the local authority for each individual application, which can often take a year or longer to reach agreement. In addition there is no official method of accountability on the part of the local authority for the expenditure of money or any automatic requirement for repayment if the money is not used for the infrastructure required, even though this type of payment is often contained within the drafting of the Section 106 Agreement.
One of the main concerns about the current system is that the decision to use a Section 106 Agreement happens on a case by case basis and in the main, it is only major developments that are being targeted. It now appears that the Government wishes for almost all developments to contribute to the costs of infrastructure. In addition, it has been the intention of the Government for a number of decades to link the level of payments to the increase in land value as a result of planning permission, albeit to date this has failed to materialise.
CIL – matters under construction
In terms of the current proposals:
Local authorities in England and Wales will be entitled but not obliged to exercise their right to impose the charge which will exist alongside rather than instead of the current Section 106 Agreements. The charge will constitute an additional source of revenue for the costs of defined local and sub-regional infrastructure. The amount payable will be calculated according to a formula which will take account of the size of the development, the development value and will be indexed linked. The payment will be due within 28 days of commencement of the development and there will be enforcement provisions in relation to payment, interest payable on late payment and non-payment may be regarded as a criminal offence. The local authority is to be accountable for the spending of the revenue.
The detail of the regulations requires to be addressed. Each of the categories relating to the implementation of the CIL needs to be discussed with the industry to ensure that the requirements of developers will be met in the regulations.
- The Government are being considered for the calculation of the formula for charging, including square footage and number of rooms. It is possible that the formula will influence layout plans so as to restrict liability to the charge. In addition, the early date set for payment does not take account of cashflow problems for developers.
- The definition of "infrastructure" is to be widened so as to include all aspects of community service. It may include schools, parks and other open spaces, flood defences, prisons, police force, etc. It is also intended that it will include items of infrastructure that are required beyond a local area. In addition, even though Section 106 Agreements will deal with affordable housing, affordable housing will also be listed as one of the categories for infrastructure under the CIL. There is concern here about the possibility of double charging and the interaction of the two systems will require to be carefully monitored. It may be that payment under one scheme is offset against payment under the other.
- Various measurement options are being considered for the calculation of the formula for charging, including square footage and number of rooms. It is possible that the formula will influence layout plans so as to restrict liability to the charge. In addition, the early date set for payment does not take account of cashflow problems for developers.
- There is little clarification on appeal procedures and the basis for an appeal is presently only on factual matters. There also appears to be a shortage of trained personnel able to calculate, inspect and mediate in respect of the enforcement of the system.
- The ability of the local authority to allocate the income generated from the CIL has been set widely and may include contributions to infrastructure already in place or that straddle more than the local area. The only clear limit appears to be that the CIL is for "infrastructure" but as this is to be widely defined, this offers little comfort.
We will need firmer detail on the regulations to see evidence of the improvements for all concerned from this latest proposal. Delays are still likely and there will be an increase in negotiations between landowners and developers in relation to the allocation of the CIL. The draft legislation states that the land owner is to be responsible. However there is discussion that the developer is to be liable too and given the basis of the calculation of the charge is linked to the development, the calculation of the value of potential development land is likely to involve much debate.
Developers will find difficulty passing the costs on to the purchaser of the developed land in the current market place. In addition the end user is already assisting in the payment of infrastructure by way of the various council taxes and rates.
The British Property Federation, The Home Builders' Federation and other organisations, including those developing to produce renewable energy sources, will continue to be in discussions with the Government in relation to the detail of the new regulations. They are seeking clarity and fairness in the regulations and are also discussing whether there are to be any categories of development which may be exempt from the regulations. The Government's report expresses a commitment to a fairer and faster process and sees the industry's contribution to the negotiations as vital. Never was the influence of the development industry more necessary than at the current time. Developers are already suffering under the change in law in relation to rates for empty properties and the imminence of more stringent controls in relation to flood matters and drainage systems.
We will continue to monitor the progress of the Planning Bill and discussions of the regulations. You can read the Community Infrastructure Levy Report on the Department of Communities and Local Government website.