Community Infrastructure Levy hits Housebuilding – If only it were that simple!

Savills’ recent report, referred to by Planning and the FT – – seem to suggest the correlation between introducing a CIL and an area not being attractive for house building is simple. I don’t think it is a clear correlation to say CIL makes the area less attractive for house building.

Firstly there are very few authorities with CIL – many of them have relatively recently adopted it – Savills’ evidence base is not huge (16 local authorities). Nearly all of those that have a CIL already had a plan in place. These may have already consented much of their growth and will have allocated sites that have been the subject of planning consents that are already being built out – in the best plan led fashion. That cannot be said for all the authorities in the country.

Also, as identified by Savills, there is a huge a spike in the numbers of planning applications being granted subject to s106 obligations at every authority pre the adoption of a CIL. Many of these schemes have been in negotiation for years and to start again with discussions in a CIL world would not be desirable –although the decision rests with the developer. It is also worth bearing in mind that a lot of applications will have been hanging around for some time pre CIL as developers want a planning ‘decision’ and by that they often mean the resolution to grant subject to a s106. They are not always in a hurry to complete the s106 as they are not intending to go straight on site and the resolution will be enough for them to work on. However an authority’s decision to adopt CIL gives a new imperative to get the s106 sorted.

To compare these limited CIL authorities with the rest of the country is very misleading- it should be noted that areas without CIL are also usually areas without a plan and probably, in a lot of cases, without a five year housing land supply. These areas are magnets for developers seeking consents on unallocated land under the NPPF- the rush has been on to get planning permission on these non-plan led sites – increasing the number of houses granted in some areas.

In terms of getting money in – that only happens in a CIL regime when the development starts and in the cases of authorities with an instalments policy later still. So it is not surprising that these 16 authorities, after only a year, have little to show so far considering: the post adoption lull of consents, then the normal lag to get development on site, the developer focus on areas which are targets for non-plan led housing, and that CIL money at most authorities will only ever be able to contribute a relatively small proportion of the overall infrastructure costs associated with the growth plan.

Savills do make a very good point that CIL does not get collected from the broad range of development originally envisaged and the amount the charging authority are able to collect has been reduced due to the neighbourhood proportion, the changes in exemptions including self-build. Most authorities with large strategic sites appear to be sticking to the use of s106 with zero or low CIL for broader strategic infrastructure – this aids the delivery of key infrastructure on these large sites. Where possible, and the CIL/s106 rules allow, CIL will be best used as match funding or part of a wider funding strategy bring in money from LEPS, City Deals, New homes bonus, business rate retention etc. for strategic or sub regional infrastructure; but all of this takes time to implement. Many charging authorities (District level) have not had the experience of pulling together funding, forward funding, and delivery of major infrastructure. This is a whole new area where they will need to develop the skills and mechanisms to deliver projects themselves or with others. Having available mechanisms for future funding infrastructure and available advice for these authorities will help the delivery of infrastructure projects in these areas.


2 thoughts on “Community Infrastructure Levy hits Housebuilding – If only it were that simple!

  1. There are some good points made in this Blog in response to our Research. The purpose of which was to provide a ‘snapshot’ position of the situation today, some four years into CIL. We do intend to update this in 12 months time, which will provide an interesting comparable. It is true that the number of Local Authorities with CIL in place is relatively small, however we do expect this to increase significantly in the next 12 months and then will be able to more comprehensively analyse the outcomes in low as well as high growth locations. LPAs preparing a Charging Schedule now, in addition to Government, should learn some key lessons, which in Savills view may well be:

    • That CIL itself is unlikely to be a sufficient mechanism to deliver infrastructure in isolation, and hence priorities are essential;
    • Appropriate recognition of credible benchmark land values and levels of scheme mitigation (Section 106/ 278) are critical, and hence that CIL rates must not be set at the margins of viability;
    • The need to forward fund key infrastructure, so that delivery may occur simultaneous with CIL receipts (for example, the Government should address the issue of LPAs being able to borrow against future CIL receipts);
    • The alignment of wider funding regimes available to the private sector with the ability to offset CIL (as a payment in kind); and
    • The approach to Examination, allowing for commercially sensitive profit and value information to be shared (and tested) outside of the public domain (with appropriate accountability safeguards).

    We can only convey what our clients say (developers, house builders and landowners), which is that there is significant nervousness about the CIL regime, notably risk of Grampian planning conditions, the inflexibility created with their planning permissions, and the fact that LPAs lead on most/ all the infrastructure delivery. That explains, at least in part, the ‘rush’ to gain planning permissions before CIL. Many LPAs are simply too small to adequately resource infrastructure implementation, and there are additional complexities created in two-tier LPA areas. Unitary Authorities are better placed, and it is little surprise that the Mayoral CIL is proving a success, as this is focused on a single project, administered by a regional/ strategic authority.

    We therefore remain of the opinion that larger scale development is best led via planning condition/ Section 106. The Government may wish to look at the Regulation 123 pooling restrictions, as this is having an unintended consequence, which results in some Local Authorities (i.e. Wokingham) becoming nervous themselves that developers will seek to ‘circumnavigate’ infrastructure requirements owing to legal technicalities. In reality, this will be unlikely, notably for site specific infrastructure, which developers also have a commercial interest in delivering.

    Finally, we would add that there is presently a failing in the Regulations to adequately test CIL at Examination. This absolutely has to assess delivery mechanisms as well as viability. Some LPAs are pursuing CIL some years post their development plan adoption. A solution will be to properly align Local Plan production and CIL production, and either test the CIL at the time of the Local Plan Examination (as part of infrastructure testing at the Local Plan Examination) or where a CIL follows, to allow proper examination of the delivery mechanisms.

    One thing is for sure, expect further reform in 2015.

  2. I think it is understandable that the development industry is concerned about the delivery of infrastructure by charging authorities. This makes it increasing important for authorities to work together with each other, County Councils and Local Enterprise Partnerships to fund and deliver infrastructure. But regardless of these arrangements, for on-site infrastructure on large sites the simplicity and efficiency of having it provided by the developer, based on a s106 obligation, is very attractive for everyone concerned.
    I share the concern of local authorities about the implications of the pooling restrictions for sites not paying a CIL- developers might well try to avoid infrastructure provision by chunking up a site into more than 5 parts making it impossible to collect all the contributions for essential infrastructure. This lack of a mechanism to pay for necessary infrastructure may result in refusal of permission, impacting on the 5 year housing supply, or approval of development that has not provided the supporting infrastructure which would further alienate local communities. Read my earlier blog on this-
    However, I cannot agree that it is necessary to make CIL and CIL examinations more complex. The development industry keep asking for changes- those others that make CIL more complex and less flexible for the local authority might come back to bite them.
    The tightening of the Reg 123 may already be restricting the use of CIL, limiting the benefits of using it for positive economic effect. It may be difficult for authorities to take advantage of unexpected match funding opportunities that have a positive economic effect on the area.
    The benefit of CIL is that it is a broad based approach, which is demonstrated by the Mayoral CIL and its success. The linkage of tying CIL to the plan making timetable and trying to pin down the delivery of infrastructure to these processes fails to appreciate the dynamic nature of development and of other public funding streams. As CIL will only partially fund the infrastructure required to support the growth of an area, the community that will have to live with the development, through the local authority as a representative responsible body, should determine what the priority for infrastructure spending is at any time.
    Until there is a crystal ball for us all to predict the development that will come forward (including windfalls) and public sector funding streams, the CIL regulations should not tie CIL to Plan making. That is not to say that there should not be support and advice on infrastructure funding and delivery for smaller local authorities that have not previously been delivery agents.

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