Views sought on further reform of the Community Infrastructure Levy.
As part of its pledge to boost home ownership, the government intends to reform the current system of developer contributions. It has issued a consultation, which is open until 10 May 2018.
The key themes of the consultation are centred around a desire to make the system simpler and more transparent, thus boosting swifter development. So what changes can we expect?
Simplification of the process
A local authority can only charge the Community Infrastructure Levy (CIL) if it has adopted a charging schedule. The process for putting a charging schedule in place is currently fairly lengthy, with local authorities required to undertake two consultations on their proposed CIL rates.
The government's view is that this protracted procedure is part of the reason that some local authorities have not adopted CIL charging schedules. It is, therefore, proposing that the process be made more streamlined. This would be done by aligning the requirements for evidence on infrastructure need and viability with the evidence needed for making a local plan.
Section 106 pooling requirement
Since April 2015, local authorities have not been able to fund an infrastructure project or type of infrastructure by pooling contributions from 5 or more separate section 106 agreements. This pooling restriction was designed to encourage local authorities to adopt CIL charging schedules. However, the government now acknowledges that, in some circumstances, it can stifle development.
The consultation proposes removing the pooling restriction in any of the following circumstances:
- Where the local authority is already charging CIL.
- Where it would not be feasible for the authority to adopt CIL in addition to securing the necessary developer contributions through section 106 agreements. It is proposed that feasibility would be set nationally. Those authorities where average new build house prices are within the lowest 10% of those in England would have the pooling restriction removed.
- Where significant development is planned on several large strategic sites.
Greater flexibility in relation to exemptions
Under the current system, entitlement to a relief from CIL is lost if a commencement notice is not submitted before the development begins. Those who are not accustomed to dealing with CIL can find themselves having to pay CIL where they should have been able to claim relief. The government is proposing a relaxation of the requirements, with the introduction of a grace period during which the commencement notice can be submitted without the benefit of the relief being lost.
Set CIL rates based on existing land uses
Although local authorities can set different CIL rates for different areas, and also different rates depending on the development type, there is currently no scope for rates to be set based on differing existing land uses. The government wants to change this. Its view is that this will enable local authorities to charge a rate which better captures the infrastructure needs and value generated through planning permissions.
However, a site may have multiple land uses, and the government's proposal could well complicate, rather than simplify, the current system.
Earlier this year, The Community Infrastructure Levy (Amendment) Regulations 2018 came into force. These clarify what should be done in relation to permissions granted under section 73 of the Town and Country Planning Act 1990.
However, there is still concern that the indexation provisions in the Community Infrastructure Levy Regulations 2010 (CIL Regulations) do not work as well as they should. CIL charges are currently indexed to the Building Cost Information Services (BCIS) All-In Tender Price Index. This reflects changes in contractor costs, and is used to account for changes in the costs of delivering infrastructure. However, house price inflation does not rise at the same rate as contractor costs.
The government is, therefore, proposing indexing to a measure which is more market responsive, such as house prices. The house price index may not be appropriate for commercial development and views are sought on the index that should be used for non-residential developments.
Regulation 123 lists
Regulation 123 of the CIL Regulationsprovides for charging authorities to set out a list of those projects or types of infrastructure that it intends to fund, or may fund, through CIL. Although charging authorities are required to report annually on how much CIL has been received, and how it has been spent, there is huge variation in the depth of information provided by authorities.
To improve transparency, the government intends to replace Regulation 123 lists with a requirement for local authorities to provide an annual statement in an open data format. Views are sought on the details that should be included in the annual statement.
Strategic Infrastructure Tariff (SIT)
Following recommendations in the CIL Review, the government is proposing that Combined Authorities be able to charge a SIT. This would operate in the same way as Mayoral CIL and would be used for strategic infrastructure projects.
The consultation is open until 10 May 2018. We will continue to monitor and report on developments.
Katherine Evans, Head of Planning and Environment, said: "At long last the government has made some proposals following the CIL Review. Removal of Pooling Restrictions especially in respect of large sites is a practical suggestion and to be welcomed. The introduction of SIF is largely the only recommendation from the CIL Review that is being proposed in this consultation and otherwise the proposals are largely more tinkering around the edges. Developers would like to see CIL monies positively used for infrastructure that benefits the developments that are funding CIL and although further reporting is helpful, it doesn't go far enough."