Summary and implications

Westminster City Council (WCC) is hoping to use its existing powers to introduce a new public realm credit system to encourage developers to pay for (or carry out) public realm improvements, without the need for planning permission.

  • The incentive for developers is that “credits” can be used at a later date to offset future section 106 contributions for public realm improvements required as part of a development proposal. This is subject to certain conditions.
  • WCC held a consultation on the proposed scheme and is in the process of reviewing the responses with a report due this month. Depending on the nature of the responses, a finalised proposal is due to be published later this year.
  • It will be interesting to see whether the scheme receives support from consultees and if similar schemes are implemented elsewhere in the country.

What are public realm credits?

Developers who invest in public realm schemes independently of development proposals (by paying for or carrying out public realm improvement works) can apply for their investment to be registered as a public realm credit. If their application is approved, the public realm credit may be used to offset future section 106 contributions towards public realm projects.  

Qualifying works

WCC have published a draft Supplementary Planning Document (SPD) which defines the type of works that qualify for funding from public realm contributions. Examples are improvements to pedestrianised areas, public open spaces, public facilities and the provision of signage. The works must be:  

Part of a WCC approved scheme – The contribution must be paid towards one of WCC’s public realm schemes. In addition, highway works necessary to allow for a development and public art will be required in the normal way and will not be accepted for public realm credits. Developers are advised to obtain WCC’s written confirmation that the scheme they are contributing to is one on the council’s approved list.  

Deliverable – The contribution must be made towards a public realm project that is deliverable within a reasonable timeframe. WCC will be required to spend the moneys on the identified project within seven years. Where WCC cannot deliver the project within this period, or it decides to abandon the approved scheme, WCC will use the contribution to fund an alternative priority public realm project within the same public realm contribution area. Consultees have asked that the moneys be repaid instead.

Value – The contribution must have a value of £50,000 or more. Where works are undertaken, the value of the credit will usually be the cost of the works. The developer will be required to provide a breakdown and evidence of the cost of the works.

The application process

Developers will have to make a formal application for a public realm credit and pay the relevant application fee (£1,000) and a monitoring fee (£2,500).

The application may relate to a proposed or a retrospective contribution (where made after 1 January 2008). However, a credit cannot be used to offset an existing section 106 contribution. Similarly, a credit cannot be derived from works or finance that have already been secured as part of an existing section 106 agreement.

There is no definitive timescale for approval of the application, but WCC should deal with the application promptly and within a reasonable period.

Conditions may be attached to the credit approval to ensure that there is a clear link between the contribution and the future development proposal. A public realm credit can only be used for a development scheme within the same public realm contribution area.

Public realm credits will be registered to the applicant only and no trading of credits will be permitted. However, a joint venture partner may use its credits for a joint venture scheme, subject to obtaining the council’s agreement. Consultees have asked WCC to reconsider the restriction on trading credits.

Once approved, the public realm credit will be registered on WCC’s credit monitoring system and confirmation in writing will be sent to the applicant. The Developer has seven years in which to offset the public realm credit.

Credit or curse?

The benefit of public realm credits will be that developers can improve the surroundings of their developments and offset the cost against future section 106 requirements. WCC has acknowledged that improving the public realm is crucial to attracting further investment and maintaining investor confidence but that it cannot secure these improvements without developers’ support.

The constraint for developers is that only certain types of public realm improvements qualify for the credits and a minimum value has been set. As there are application costs, developers should ensure that their application meets WCC’s criteria. In addition, public realm credits will not be index linked and interest accrued from financial contributions will not be added. As a result, the value of the credit will remain constant until it is offset against a future planning obligation. This means that to maximise the value of the credit, developers will need to consider the length of time between obtaining the public realm credit and the submission of its proposed planning application. There may be cost implications of considerable delay in submitting a planning application.