05 June, 2019
The reform of developer planning contributions continues with the government proposing its seventh set of reforms to the Community Infrastructure Levy (CIL) Regulations 2010. The latest set of draft reforms seek to improve the operation of CIL by reducing complication, increasing market responsiveness and transparency all whilst simplifying CIL for both developers and local authorities.
Key amendments include:
The Removal of Pooling Restrictions
Although the pooling requirement was introduced to encourage local authorities to adopt CIL charging schedules, it often subdued development. This is as the restriction paid little regard to the realities of infrastructure funding, particularly for large developments where the use of planning obligations for infrastructure such as open space provisions, education provisions and highway works was often restricted. By removing the restriction local authorities will once again be allowed to collect more than five contributions to fund the same item of infrastructure using s106 obligations.
The Removal of Regulation 123
Regulation 123 allowed charging authorities to set out a list of developments or types of projects and infrastructure that they intended to fund through CIL. Although the charging authorities were required to report annually on how much CIL had been received and how it was spent, there was considerable discrepancy in the amount of information provided by authorities.
To improve transparency, the government has sought to remove this regulation and replace it with a requirement for local authorities to provide an annual statement in an open data format. This will be via an Infrastructure Funding Statement. This is a standard statement, which requires local authorities to set out anticipated contributions from both CIL and s106 obligations, together with information on how these funds will be used.
Exempt Starter Homes
The introduction of exempt starter homes as a form of affordable housing is a welcome reform. There has often been debate about whether or not starter homes should be required as part of affordable housing schemes and more often than not it has been left up to the local authorities and developers to come to some form of agreement over type and tenure of affordable housing provisions.
The exemption means that only Starter Homes and Shared Ownership Homes will meet the requirements under paragraph 64 of the National Planning Policy Framework (NPPF) (which requires at least 10% of homes available for affordable home ownership on major developments involving the provision of housing) and qualify for the mandatory CIL relief. All other types of affordable housing set out in the glossary to NPPF (e.g. discounted market sales and affordable rent) will not be exempted and will continue to attract CIL. As such, if you wish to satisfy paragraph 64 you must ensure that your financial assessments include full CIL liability.
Penalties for Failing to Serve Commencement Notices
The reduction in the penalty for failing to serve a Commencement Notice prior to starting works is a welcome amendment. The government seeks to impose a financial penalty of a surcharge of 20% or a fine of up to £2,500.00, whichever is lover. This would replace the current penalty which required the loss of the entirety of relief from CIL, as if no exemption existed.
Changes to Indexation
CIL charges will no longer be indexed in accordance with the BICS All-In Tender Price Index. Instead, indexing rates will be aligned to track the development value. For instance, the local House Price Index will be the rate for residential developments, and the Consumer Price Index for non-residential developments. This could potentially lead to a reduction in CIL during economic decline, which is positive for developers, if not for councils.
In addition to the above, the draft amendments also aim to:
Clarify that local authorities can charge monitoring fees on s106 agreements
Introduce fairer consultation requirements on the changes to CIL schedules
Amend the transitional provisions for s73 applications
CIL Regulations require approval by both Houses of Parliament. Following consultation, which ran from 20 December 2018 to 31 January 2019, the government are currently seeking views on draft legislation to amend CIL. It is not clear when the reforms will be implemented, albeit the draft Regulations anticipate that it will be during 2019. We anticipate this may result in more local authorities taking up CIL and using s106 Agreements less and less - though watch out for additional conditions being attached to planning permissions as a result. If you would like to discuss training for your team on s106 Agreements/Planning/CIL/Affordable Housing Statements focusing on housing nuances then do please get in touch.
For more information contact Aisha Bhailok in our Housing & Regeneration department via email or phone on 01772 220240. Alternatively send any question through to Forbes Solicitors via our online Contact Form.